COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of "herd immunity". Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Click HERE to access the FSInsight COVID-19 Daily Chartbook.

We are shifting to a 4-day a week publication schedule:

  • Monday
  • Tuesday
  • Wednesday
  • SKIP THURSDAY
  • Friday

STRATEGY: Equities post largest 1D % gain since Nov election, while VIX falls + bonds rally = boom
US daily cases are falling again and on track for sub-40,000 this week… yay

It looks like the downturn in US COVID-19 cases is resuming.  There was a mini-scare last week as cases turned up, but our lead data scientist, tireless Ken, noted that the cold weather likely artificially suppressed testing and the surge last week was merely a “true up” — looks like he was correct.  The downturn in cases resumes.

– tracking for sub 40,000 this week
– tracking for sub 25,000 mid-March
– if USA matches 5 states with something akin to “herd immunity” cases <15,000 by end of March

Whoa.


COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: COVID-19 Tracking Project  and Fundstrat



Watch those states with >60% combined infections + vaccinations…
For some time, we have pointed how important it is to watch states with combined vaccinations + infections >60%.  For a long time, it was just North Dakota and South Dakota.  The reason being that if there is something akin to herd immunity, the case trends in these states should become extremely favorable.

Per data by tireless Ken, there are now 5 states where the combined figure is solidly >60%:
– South Dakota    +72%
– North Dakota    +71%
– Rhode Island     +66%
– Arizona              +62%
– Oklahoma         +61%

So, given the continuous vaccination and improving rate, more states are crossing over 60%.

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: CDC, COVID Tracking Project and Fundstrat


Utter collapse in daily cases taking place in these 5 states…
The daily case figures are showing an utter collapse of COVID in these states.  Take a look below at the 7D moving average:

– South Dakota    -89%
– North Dakota     -95%
– Rhode Island     -81%
– Arizona              -87%
– Oklahoma         -83%

Recall how these states were suffering catastrophic hospitalization and deaths and soaring case figures.  But as vaccination penetration has surged, cases are collapsing. 

– Consider this, if the USA figures matched the improvement of North Dakota, the US would only be reporting 15,000 cases per day
– Get the picture?  If the vaccination efforts remain effective, we could see dramatic improvements in coming weeks

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway





STRATEGY: Equities post largest 1D % gain since November 2020 elections and prior to that… March 2020 bottom…
Equities posted staggering gains on Monday:

– DJIA                      +1.98%
– S&P 500                +2.38%
– Nasdaq                 +3.00%
– Russell 2000         +3.60%
– Russell Microcap  +4.80%

So, the rally was strong across the board, but particularly strong for riskier equities — a classic risk-on sign.  But there were multiple reasons to “respect” these gains:

– equities posted largest 1D gain since Nov 3, 2020 (below)
– VIX -16% to 23, down -4.6 and -26% from the 31 on 2/25/2021
– 10-yr interest rates backing off from 1.6% on 2/25/2021
– US economic data was very good, Feb ISM 60.8 vs 58.7 in Jan, construction spending +1.7% MoM

So, this was not necessarily a dead-cat bounce.  In fact, take a look at the chart below.  We have only seen similar 1D % gains twice in the past year.  There was a cluster after:

– Nov 3, 2020 elections, the start of an 18% rally
– March 2020 bottom, the start of a +50% rally

Hmmm…. so in the past year, after an extended sell-off, a major 1D price gain, coupled with strong positive market breadth is a signal of a rally.  This has been the case and, in our view, a decent framework for what to expect.  In other words, we think this signals further gains ahead – potentially strong gains.

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: Fundstrat and Bloomberg


Bond VIX last week also signaled an equity bottom was imminent…
Last Thursday evening (Friday AM), our data science team pointed out that the near record surge in bond volatility (CBOE Bond VIX) was the 4th such spike in the past decade. And importantly, the 3 prior times of such a Bond VIX spike, where the rate of change (ROC) surged like it did, have been signs of a contemporaneous stock market low.

We highlighted the 4 instances where the Bond VIX spiked + ROC soared >20:
– June 24, 2013
– October 15, 2014
– March 19, 2020

Yes, 3 of 3 times previously, it was a major stock market bottom.  Nearly to the day.  Although on March 19th, it was 1-day before the bottom.

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway


Source: Fundstrat and Bloomberg


This is what we showed last week, for the 3 precedent instances:

– June 24, 2013, S&P 500 bottomed to the “day”
– October 15, 2014, S&P 500 bottomed to the “day”
– March 19, 2020,  S&P 500 bottomed to the “day”

Notice a pattern here? And now it looks like this 4th instance was also the local bottom.


COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: Fundstrat and Bloomberg


STRATEGY: Fundstrat Global Portfolio Strategist, Brian Rauscher, upgrades view on Energy… affirming Energy MUST BE OWNED
Our Head of Global Portfolio Strategy, Brian Rauscher, has raised his outlook for Energy to “Outperform – low” from Neutral.  Brian, formerly the investment strategist at hedge fund Fortress Investments, manages a proven sector selection and stock selection model.  Many of our clients use it profitably.  And over the past few months, his model has advocated a shift towards an overweight in Energy:

– foremost, his 8-panel model is no longer “negative” on Energy
– additionally, the macro backdrop is stronger
– Rauscher’s model tracks global EPS and sales revisions very closely

Hence, the fact that his model is turning favorable on Energy lends further fundamental credibility to Energy’s strength.  While I don’t want to speak for his model, rate of change is what is key.  And as legendary investor Tom Luddy, formerly vice chairman of JPMorgan, famously says:

– “less bad, is positive change, hence less bad is good”

That is exactly what supports, in our view, our continued confidence in the upside for Energy stocks.  Recall, based upon $60 crude, XLE and OIH, the proxies for Energy and Oilfield services, has 40% and 90% upside from current levels.  Thus, we urge clients to overweight this sector, in a BIG WAY.


COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: Fundstrat


STRATEGY: Rationale for why investors need to increase their exposure to Epicenter…
When looking at this positioning data, one can really get the sense that Energy is a completely orphaned sector.  Hence, the rise in Energy stocks, we believe, is eventually going to create FOMO. We continue to urge investors to increase their exposure to “Epicenter” and reduce “Growth.”

One thing to keep in mind is that as the economy re-opens, investors and customers are going to be living a very different experience.  Consider some “future” anecdotes we might see by Summer 2021:

What will be thinking?
– Theme parks are booming, I am going to buy Netflix? Nope
– People are back at the gym, I am going to buy Peloton? Nope
– I am taking my first trip in a year, I am going to buy Zoom? Nope

So you can see, there will be a shift in the mindset of both customers and investors as we move through mid-year and it will show up as consumer wallet change and in equity investor decisions.

– Notably, take note below. 
– Energy is up 31% YTD, yet hardly anyone is talking about Energy

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: Fundstrat and Bloomberg

STRATEGY: Epicenter Trifecta List 121 stocks(*)
The case for being Cyclically-tilted is strengthening:
– Vaccine rollout set to accelerate
– US cases collapsing
– US economy set to re-open
– US corporates reset cost structures = strong operating leverage
– US credit markets strong = cost of capital falling


Below is our updated “Trifecta” epicenter stock list. These are the stocks which were hit the hardest by the pandemic and have the greatest operating leverage to a re-opening.  And we like the earnings upside in these stocks, because of the massive cost reset.  The stocks are based on positive views coming from the trifecta of: (i) Quant (tireless Ken), (ii) Global Portfolio Strategy (Brian Rauscher, aka Rocky) and (iii) Technicals.  

Consumer Discretionary:
AN, GM, F, GRMN, LEG, TPX, TOL, NWL, MAT, PII, RL, MGM, HLT, MAR, NCLH, RCL, WH, TNL, SIX, DRI, SBUX, FL, GPS, KSS, LB, VFC

Financials:
FITB, WTFC, ASB, BOH, FHN, FNB, PB, PBCT, RF, STL, TFC, WBS, PNFP, PACW, SBNY, NYCB, MTG, EVR, GS, IBKR, VIRT, BK, STT, SYF, BHF

Industrials:
AGCO, OC, ACM, WAB, EMR, GNRC, NVT, CSL, GE, IEX, PNR, CFX, DOV, MIDD, SNA, XYL, FLS, EAF, TTC, ITT, ALK, DAL, JBLU, LUV, MIC, KEX, UNP, JBHT, R, UBER, UHAL, LSTR, MAN

Energy:
XOM, HP, BKR, HAL, NOV, SLB, COP, EOG, FANG, HES, MRO, MUR, PXD, XEC, HFC, MPC, PSX

Basic Materials:
LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON, IP

Real Estate:
BXP, HIW, UDR, KIM, NNN, WRI, VNO, JBGS, RYN

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway
COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: Fundstrat, Bloomberg

(*) Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile.






ADDENDUM: We are attaching the stock lists for our 3 portfolios:
We get several requests to give the updated list for our stock portfolios.  We are including the links here:

– Granny Shots  –>       core stocks, based on 6 thematic/tactical portfolios
– Trifecta epicenter  –> based on the convergence of Quant (tireless Ken), Rauscher (Global strategy), Technicals
– Violence in USA –> companies that are involved in some aspect of home or personal security. We are not “recommending” these stocks, but rather, bringing these stocks to your attention.

Granny Shots:
Full stock list here –> Click here
Tickers: AAPL, CSCO, INTC, MXIM, NVDA, EBAY, KLAC, GRMN, GOOG, MNST, MSFT, AMZN, QCOM, TSLA, PYPL, AXP, BF/B, PM, XLNX, TGT, PG, XOM, VLO, GL, RF, ATVI, BBY, GE, AMAT, LRCX, MU, HPQ

Trifecta Epicenter (*):
Full stock list here –> Click here
Tickers: AN, GM, F, GRMN, LEG, TPX, TOL, NWL, MAT, PII, RL, MGM, HLT, MAR, NCLH, RCL, WH, TNL, SIX, DRI, SBUX, FL, GPS, KSS, LB, VFC, FITB, WTFC, ASB, BOH, FHN, FNB, PB, PBCT, RF, STL, TFC, WBS, PNFP, PACW, SBNY, NYCB, MTG, EVR, GS, IBKR, VIRT, BK, STT, SYF, BHF, AGCO, OC, ACM, WAB, EMR, GNRC, NVT, CSL, GE, IEX, PNR, CFX, DOV, MIDD, SNA, XYL, FLS, EAF, TTC, ITT, ALK, DAL, JBLU, LUV, MIC, KEX, UNP, JBHT, R, UBER, UHAL, LSTR, MAN, XOM, HP, BKR, HAL, NOV, SLB, COP, EOG, FANG, HES, MRO, MUR, PXD, XEC, HFC, MPC, PSX, LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON, IP, BXP, HIW, UDR, KIM, NNN, WRI, VNO, JBGS, RYN

Violence in USA:
Full stock list here –> Click here

(*) Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile.





POINT 1: Daily COVID-19 cases 42,769, -6,095 vs 7D ago… The decline in daily cases resumes…

_____________________________

Current Trends — COVID-19 cases: 
– Daily cases    42,769 vs 48,864 7D ago, down -6,095
– 7D positivity rate   4.9% vs 5.7% 7D ago
– Hospitalized patients   46,738, down -16% vs 7D ago
– Daily deaths    1,996, up +5.4% vs 7D ago
_____________________________



– The latest COVID-19 daily cases came in at 42,769, down -6,095 vs 7D ago.  
– After being positive for three days last week, the 7D delta in daily cases has turned negative again. This shows the rise in daily cases last week could just be the results of the distortion of test/case data due to the cold snap.
– Overall, a negative 7D delta is good news as the cases are still falling. 


COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: COVID-19 Tracking Project  and Fundstrat


7D delta in daily cases turns negative for 4 consecutive days of declines = hopeful sign?
After being positive for three days last week, the 7D delta in daily cases has turned negative again. This is good news – it shows the rise in daily cases last week could just be the results of the distortion of test/case data due to the cold snap and that the daily cases in the US are still falling.

  
 

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: COVID-19 Tracking and Fundstrat  




US hospitalization still rolling over … and even US deaths seem to be rolling over…
Below we show the aggregate patients who are currently hospitalized due to COVID. It has fallen significantly from the wave 3 peak.

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway


Source: COVID Tracking Project and Fundstrat


COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: COVID Tracking Project and Fundstrat



COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway
COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: COVID-19 Tracking and Fundstrat 




 

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: COVID-19 Tracking and Fundstrat  

 




POINT 2: VACCINE: 9 states (+2 vs Friday) near ~60% infected + vaccinated

_____________________________

Current Trends — Vaccinations: 
Vaccinations ramping steadily
– avg 1.7 million this past week vs 1.8 million last week
– overall, 7.4% have 2-doses, 14.9% 1-dose
_____________________________



Vaccination frontier update –> 9 states > 60% combined penetration (vaccines + infections)
Below we sorted the states by the combined penetration (vaccinations + infections).  As we commented in the past, the key figure is the combined value >60%, which is presumably near herd immunity.  That is, the combined value of infections + vaccinations as % population > 60%.

– Currently, ND + SD + RI + AZ + OK + UT + TN + NM + NE are basically all at this level
– So slowly, the US is getting to that threshold of presumable herd immunity

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: CDC, COVID Tracking Project and Fundstrat



There was a total of 2,419,397 doses administered today, up from 1,794,414 7D ago. Overall, the pace is steadily rising, as evidenced by the 7D moving average (see blue line).

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: CDC, COVID-19 Tracking Project and Fundstrat 


~43% of the US has seen 1-dose penetration >15%… still not wide geography
To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with 2-doses covering at least 5% (and 10%) of its residents, displayed as the orange line on the chart. Currently, all US states have seen 5% of their residents with 2-doses administered.   However, when looking at the percentage of the US with 2-doses covering at least 10% of its residents, this figure is only 2%.


– While all US states have seen vaccine penetration >10%, 43% of them have seen 1 dose penetration >15%. Not a lot of geography.
– All of the US has at least 5% of its residents with the full 2 doses, However, only 2% of US has 2-dose vaccinated >10%
– This is still a small figure (5%/10% of residents with 2 doses) but this figure is rising sharply now
– The takeaway is that the vaccination efforts are unlikely to be having much of an effect on case figures, currently

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: CDC, COVID-19 Tracking Project and Fundstrat 



This is the state by state data below, showing information for states with one dose and for those with two doses.


COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: CDC, COVID-19 Tracking Project and Fundstrat 





The ratio of vaccinations/ daily confirmed cases is generally trending higher (red line is 7D moving avg) and this is the most encouraging statistic. 

– the 7D moving average is about ~30 for the past few days
– this means 30 vaccines dosed for every 1 confirmed case

This figure is rising nicely and likely surges in the coming weeks


COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: CDC, COVID-19 Tracking Project and Fundstrat


In total, about 49 million Americans have received at least 1 dose of a vaccine.  This is a good pace and as we noted previously, implies 30% of the population by April.  

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: CDC and Fundstrat




POINT 3: Case trends in these 5 states certainly seems to argue in favor of “herd immunity”
Watch those states with >60% combined infections + vaccinations…
For some time, we have pointed out how important it is to watch states with combined vaccinations + infections >60%.  For a long time, it was just North Dakota and South Dakota.  The reason being that if there is something akin to herd immunity, the case trends in these states should become extremely favorable.

Per data by tireless Ken, there are now 5 states where the combined figure is solidly >60%:
– South Dakota    +72%
– North Dakota    +71%
– Rhode Island     +66%
– Arizona              +62%
– Oklahoma         +61%

So, given the continuous vaccination and improving rate, more states are crossing over 60%.

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: CDC, COVID Tracking Project and Fundstrat


Utter collapse in daily cases taking place in these 5 states…
The daily case figures are showing an utter collapse of COVID in these states.  Take a look below at the 7D moving average:

– South Dakota    -89%
– North Dakota     -95%
– Rhode Island     -81%
– Arizona              -87%
– Oklahoma         -83%

Recall how these states were suffering catastrophic hospitalization and deaths and soaring case figures.  But as vaccination penetration has surged, cases are collapsing. 

– Consider this, if the USA figures matched the improvement of North Dakota, the US would only be reporting 15,000 cases per day
– Get the picture?  If the vaccination efforts remain effective, we could see dramatic improvements in coming weeks


COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway


For those wondering how we get these figures, this is the table compiled by our data science team.

COVID-19 UPDATE: US COVID-19 cases tracking for sub-40,000 this week while 5 states show evidence of herd immunity. Global Strategist Rauscher upgrades Energy to OW, supporting fundamental EPS revisions underway

Source: CDC, COVID Tracking Project and Fundstrat

More from the author

Disclosures (show)

Stay up to date with the latest articles and business updates. Subscribe to our newsletter

Articles Read 1/2

🎁 Unlock 1 extra article by joining our Community!

Stay up to date with the latest articles. You’ll even get special recommendations weekly.

Already have an account? Sign In

Want to receive Regular Market Updates to your Inbox?

I am your default error :)