COVID-19 UPDATE: Mind the growing divergence of cases (up) and hospitalizations (down). China V-shaped recovery + US "v-like" + epicenter bonds rally = OW "epicenter". 35 Large-cap Epicenter stocks. 49 SMID-cap Epicenter stocks.

Stocks sold off sharply last week and based on our multiple conversations with clients last week, two things came up frequently:

- first, investors are leary of the rise in reported COVID-19 cases because gov't may be forced to "pause'
- second, investors feel stocks have advanced too far ahead of fundamentals

In our view, we remain very constructive on stocks.  We see fundamental catalysts to support "upside surprise" to fundamentals driven by what looks like more and more V-shaped recoveries in the US and elsewhere.  And we see strong liquidity support.  After all, with $5T in money market funds on the sidelines, a Fed with "unlimited support" and private equity sitting on $2T, any money an investor puts to work today has $10T plus behind it.  And the incremental health data was mostly encouraging over the weekend.

The China economic recovery is now turning into a bonafide V-shape.  And as pointed out by JPMorgan Chief Economist, Bruce Kasman, it is led by exports.  

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Source: JPMorgan

The China PMIs, both manufacturing and services certainly show a vigorous recovery.  China and US are essentially the only 2 real independent drivers of global demand.  Hence, the V-shaped rebound in China is already pointing to a Global "V"

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