COVID-19 UPDATE. Revisiting NYC. Still an inferno, as NYC daily cases > every state in the US and high for 65-plus. NGA (National Governors Associations) puts forth Roadmap to Recovery

COVID-19 remains a global crisis and we realize that many people need to keep up with COVID-19 developments, particularly since we are moving into the more critical stage (“restart economy”), so feel free to share our commentary to anyone who has interest.


We have done many Zoom calls with our clients over the last few days (let us know if you want to do one, we would be glad to set one up, but ignore the sparse furnishings in my home office). 

In every conversation, the key topic is the uncertainty – uncertainty of how the world ends this pandemic crisis, uncertainty about when economies open, and more uncertainty about the path and speed of recovery.  Another issue, but not as universal, is a general skepticism, or rather, curiosity about why risk markets are actually rallying.  This latter point is logical since we are only one month into the “economic depression.”   These viewpoints are rational.  After all, there is no playbook for a global pandemic, and therefore, every citizen, policymaker, and investor is operating in “new territory.”

But the prevalence of uncertainty underscores that investors are not bullish at all.  Ok, at least our institutional investor clients are not that bullish.  But as we have observed, the risk positioning of an uncertain investor is the same as a bearish investor.  Thus, widespread uncertainty = bearish positioning. And as uncertainty decreases, the marginal change that matters is someone becoming “less bearish”–if they turn bearish, their positioning is already there largely.

In short, as we move the “way forward” through this crisis, and as visibility improves, uncertainty drops = incrementally risk on = stocks rise.  In our view, incremental developments would have to be much worse for stocks to retest/create new lows.  But the future is uncertain.  We are merely sharing our observations.  Take it with a grain of salt.


POINT #1: New York City improving but >3,500 cases/day exceeds every single state in the USA.  Plus, new cases elevated for 65-plus despite strict social distance measures–only modest improvement since 4/9/2020.
We have not published NYC level for some days, partially because the city had changed its methodology and data collection several times and our data scientist, tireless Ken, cautioned we need to let the data “season” for a week or so.  The summary of NYC’s daily net new cases is below and the latest figure is 3,563 net new cases.  This is down from 7,520 NYC  on 4/9/2020, so NYC is 12 days past its “apex”

– Progress since then has been choppy and slow.  NYC had 19 days where cases hovered around 4,000 and even the last figure of 3,563 is close to flat.

– In fact, NYC reports more cases daily than every state in the USA (yup).  Even New Jersey (#2 overall) reported 3,478 cases yesterday.

– Think about that, NYC remains the epicenter and even after 12 days, has seen cases ~50% off the peak, but still staying in a ~4,000 per day range.

If NYC still has elevated reported cases of COVID-19, why are ER visits for “flu-like illness” back to pre-pandemic levels?
The White House outlined ER/hospitalization surveillance for “flu-like” illness as one of the gating criteria.  And every city/state is required to keep records of this as part of flu surveillance operations.  We have provided the NYC data below.

– ER visits for flu-like illnesses are back to pre-pandemic levels for almost all age groups, except for older adults — 65-plus.

– So, it seems like ER visits for flu-like, including COVID-19 are down.

Age data in NYC shows adults >64-plus still seeing high levels of new cases, DESPITE strict social distance measures… doesn’t this undermine the actual case to social distance?
This table below shows daily cases reported by borough (top half) and by age group.  Below, it shows the high levels still being reported by Queens.  Queens has not seen any real improvement since 4/9/2020 compared to other areas. 

– Staten Island cases are down nearly 90%.
– Manhattan down ~66%
– the only age group seeing a sharp drop in cases is 18-44 years old.  Why is the level so high for 45-64? and especially 65-plus?

This is the opposite of what social distance is designed to protect.  Social distance is supposed to reduce cases for older adults.  But this has not been the case.  In fact, it kind of makes one question if the social distance is working–if it was, older adults, who everyone knows needs to be protected, should see the biggest collapse in cases.

POINT #2: NYC so bad, even Detroit (an inferno) now beating NYC.  DC, Philly, Chicago, all initially worse than NYC, way ahead…
NYC has performed so poorly, that 4 cities which were initially “far worse” than NYC, are all outperforming NYC based on cases per 1mm residents.  Think about that.  NYC has not managed to post meaningful improvements, despite strict social distance measures, even as other cities, which were worse improved.

– Detroit is the most glaring.  By day 18, Detroit had 6X the number of cases per 1mm residents but has since flattened its curve.

In fact, NYC is about to overtake New Orleans… which was at one time considered the worst outbreak due to Mardi Gras
NYC has now passed Jefferson Parish, Louisiana for cases per 1mm residents and is about to overtake New Orleans.  We may be belaboring the point.  But it seems like there is NYC, a really pervasive outbreak.  And then, there is the rest of the USA.

POINT #3: USA overall reporting a rise in cases since Sunday, but still 18% off the “apex” reported 12 days ago.
The US total cases came in at 28,290, up from the last few days but still down 18% from the peak 12 days ago.  I want to thank all of our clients who have identified some errors in the data we collect.  Tireless Ken has been cross-checking and scraping from state data but data sources remain somewhat less reliable at the state level (county data is more consistent, strangely, except for NYC).

The rise in cases in the last few days is attributable to jumps reported by NY, CT, and Illinois as shown below.  CT tends to have lumpy data, so we can probably put less weight on that.

– But Illinois has seen reported cases rise from 1,151 on 4/20 to 2,049 on 4/22, or nearly doubling in new cases over the past two days.

These are the 25 counties in the US with the worst COVID-19 prevalence (based on cases/1mm people)
The 25 counties with the highest cases per 1mm residents are shown below.  Topping this list is Lincoln, Arkansas which has reported 3.4% of its residents to have COVID-19. Second worst is Marion, OH with 3.2% (10,000 cases per 1mm = 1%)

– 11 of the top 25 counties with the worst COVID-19 prevalence are counties surrounding the NYC metro area (shaded red).
– Rockland and Westchester and Nassau have even worse outbreaks than NYC.

This table seems to again raise the question about what made NYC so particularly bad?

54% of the US (based on county population) has cases 50% off the peak, and 23% are 75% off the peak…
The growth rate of COVID-19 is certainly slowing, especially when we look at the county-level data diffusion.  Over 54% of the US, based on county-level population, has daily cases 50% off their peak. 

– this is better than NYC, which is not really 50% off its peak.
– and 23% of the US has cases 75% off their peak.  This line is more important.

POINT #4: NGA publishes Roadmap to Recovery.  Mostly logical, but “contact tracing” going to a lot of hiring and a lot of new techs…
The National Governors Association put forth its “Roadmap to Recovery: A Public Health Guide.” The link is here:
https://www.nga.org/wp-content/uploads/2020/04/NGA-Report.pdf


The 38-page presentation is broken into 2 parts: 

– Building public health infrastructure
– Creating a plan to re-open the economy

The second part, reopen the economy, has no concrete steps at the moment, but rather is a narrative around how plans are communicated and worked upon.  So it is too early for us to add insight.

10X-plus increase in testing, testing, testing — the NGA, and many governors and the White House believe is important.
Per the NGA, they want to see testing ramped up to tens of millions per week, compared to the roughly 750,000 conducted per week today.  This is a 10X-plus increase in testing.  They cite the high level of testing in Taiwan, South Korea, and Singapore as benchmarks (we analyzed Singapore in our FLASH from Tuesday).   To ramp this up requires expanding supply chains, getting raw materials, standardizing processes, etc, and are things Gov Cuomo has referenced recently in many of his briefings.

Hiring as many 267,000 contact tracers across the USA…
To scale Healthcare capabilities to contain the spread of COVID-19, the NGA references the need to expand the healthcare workforce focused on contact tracing.  This person would be tasked with tracing the contacts and locations that a newly infected COVID-19 individual interacted with since being initially exposed.  This is a resource-intensive task. 

Per the NGA (see below)

This is how we get to 267,000 new contact tracers:

Calculating # contract tracers
per NGA guidelines
Total US population                                                         330,000
Contact tracers per 100,000 residents                  4    to          81
Implied # workers (3,300 x # tracers)           13,200    to 267,000

Compliance-related costs and hiring will be significant once the economy is re-opened.

And of course, the technology that tracks citizen movements will be integral to this contact tracing.  The NGA is specifically considering smart-phone apps and this has been widely used in Asia (WhatsA1`pp and WeChat).  A reference is made to Care19 which is used by North Dakota’s Department of Health. 

It looks like this app was developed in partnership with ProudCrowd, which an ND-based company.  Their previous hit was Bison Tracker and Care19 is their “human” version of the app.

We have attached a screenshot of the Bison Tracker app below, in case you are wondering what the Care19 app might look like.

STRATEGY: A correction may be underway, but we expect it to be shallow and not worth “re-positioning”
Today, Brian Rauscher, Head of Global Portfolio Strategy for Fundstrat, published a new report titled “Odds rising that rally may stall — Buy the Dip” and he discusses the sloppy data in next few weeks as reasons stocks may stall.

This comes one day after Rob Sluymer, Head of Technical Strategy for Fundstrat, believes a correction is underway with the S&P 500 heading towards 2,600. 

Brian and Rob have both arrived at a similar conclusion.

This makes sense to me.  We need to digest this ~30% equity rally.  But I think the fact so many investors are uncertain, and uncertain = bearish, and coupled with rapid COVID-19 progress outside of NYC (NYC still not great), means we believe the market has shifted into the hands of buyers (half-full).  And HY has remained stronger than equities (retraced 76% of its sell-off vs 50% for S&P 500).