Equity markets traded sloppy on Wednesday, opening higher but ultimately selling off into the close, potentially due to messy allegations raised in former White House National Security Advisor John Bolton’s forthcoming memo (‘The Room Where It Happened’), given the potential implications for 2020 elections.
In addition, both Texas and Florida took steps to address the rise in COVID-19 cases seen in their state. Texas Gov. Greg Abbott is doing some ‘course correcting’ issuing a directive to bars/restaurants to comply with their state guidelines on ‘Open Texas’ –this is to address the sustained rise in recent days (total 3,129 vs distorted 4,098 yesterday) and is discussed more fully below. Similarly, Florida Gov. Rick DeSantis provided some detailed specific case and demographic information on its recent surge in cases (discussed more fully below).
The common thread is that both states are noting the majority of the increase in cases is from younger adults (vs seniors or nursing home residents) and in many cases, asymptomatic. And instead of rushing to reverse the easing of restrictions, both states want to move forward but want to adjust their plans to reflect the rise in cases. In the case of Texas, even mayors are requesting the right to require masks (currently encouraged by the state but not required).
In our review of cases, we now see 6 states (+1 Florida) with sustained rises in cases plus the risk of increased hospitalizations which are: Arkansas and Utah (for some time, but Arkansas looks like it peaked, actually), 3 border states: TX, CA and AZ and now Florida (which was on the cusp).
The economy opening is not the only known factor accounting for the rise across states. If we were to list the factors contributing to the rise in cases:
– nationwide protests involving tens of thousands of Americans (Wednesday is Day 19, so timeline fits well);
– greater mobility as restrictions eased;
– lack of ‘herd immunity’ in most states except for NY tristate area and some other hard-hit areas.
– CA, TX and AZ see imported cases from Mexico (Washington Post article May 27th)
We have noticed a number of clients querying us about this latter point, since it does not seem to be widely discussed in the media. But there is now discussion, even at the White House.
https://apnews.com/129cbe9e6320cd16ce3e845f29de0cac
Is herd immunity keeping NY/NJ from seeing any protest-related surge?
NY/NJ has a confirmed case count of 19,798/18,881 cases per 1mm residents (~2% of the state) vs CA at 3,974, TX at 3,332, FL at 3,851. See the difference? COVID-19 has run through NY/NJ and potentially, given seroprevalence tests, the residents of those two states have herd immunity. In other words, NY/NJ may be the safest places in the US and the citizens might be immune. This similar collapse in cases is seen in Italy, France and Spain, so what we are seeing in these 6 states could remind us that the respective curves are simply flatter.
Is this all a major setback to the economy re-opening? If indeed FL and TX are seeing cases rise among younger residents, and many with fewer or no symptoms, then it is not entirely clear why shelter at home is the right step. Clearly, mitigation steps and course correction are required and it looks like both states are doing this. But this only further highlights the importance of a healthcare solution — either a cure or a vaccine.
Hospitalization and death trends are considerably better than case data at the moment…
Nationwide, the trend in “gross hospitalizations” (33 states report this) and daily deaths is clearly down. So even as daily reported cases are rising, we are seeing a divergence with hospitalizations and daily deaths. Again, this raises a few questions:
– is the disease becoming weaker?
– Or is it infecting a healthier and younger patient now?
Either way, this divergence is a good thing and if it continues, it really helps mitigate our fears about a relapse.
Source: COVID-19 Tracking Project
Implications for equity markets?
The timeline for COVID-19 was largely fractured by the nationwide protests, and in our opinion, the recent rise in cases in some states reflects these infections. But many of the newer infections seem to be younger Americans and best example is Florida, where the median age of a newly infected person is 37.5 vs 66.5 in March — thus, the lower likelihood of a severe case and that is why hospitalizations and deaths are not tracking cases. If this is true, the rise in cases does not necessitate a rollback of the easing measures introduced by states. Course correction, yes. And masks would be helpful.
POINT #1: Daily Cases are rising in more states, but hospitalizations less so
Total USA cases were up +855 from 1D ago to 24,031. But the aggregate figures are disguising the churn that is taking place. There is a rise in cases taking place across multiple states, and for states with “sustained” rises, we now add a 6th state, Florida. In our view, states with BOTH daily cases rising and hospitalizations rising are:
– Arkansas and Utah (Arkansas may have already peaked)
– Border states: CA, TX and Arizona (discussed in multiple commentaries)
– Florida, which we are adding today, but with a caveat that hospitalizations are not surging
New on the cusp:
– Alabama, but cases seemed to already have peaked but hospitalizations steady
Source: COVID-19 Tracking Project
We can see this pick-up in cases on the ‘seasonal adjustment’ chart below, which compares daily cases vs the same day a week ago. And the delta vs 7D ago is higher. It is picked up in the past two days and this is highlighting the cases are rising. At the aggregate level (above chart), one still needs to squint but it is becoming more noticeable.
Source: COVID-19 Tracking Project
5 states with notable rises…
California 3,455 vs 2,108 (1D) +1,347
Louisiana 928 vs 534 +394
Georgia 952 vs 664 +288
North Carolina 1,002 vs 751 +251
Minnesota 414 vs 189 +225
Total 5 states +2,505
6 states with notable declines…
Texas 3,129 vs 4,098 (1D) -969
Arizona 1,827 vs 2,392 -565
Tennessee 313 vs 670 -357
Alabama 400 vs 640 -240
Nevada 184 vs 379 -195
Florida 2,610 vs 2,783 -173
Total 6 states -2,499
The composition of the top 10 states is a huge contrast to where this was 4 weeks ago. While cases are down since then (modestly), the notable difference is that NY tristate is no longer at the top of the list.
Source: COVID-19 Tracking Project
Source: COVID-19 Tracking Project
POINT #2: More states are seeing a rise in cases in the past day or so–more suggestive of ‘protest-led’ surge vs re-opening rise…
Over the past few days, daily reported COVID-19 cases are rising. While there are media reports ascribing this to the problems with “easing of stay-at-home restrictions,” the abrupt rise in recent days and aligns better with the ’14D’ incubation period associated with the >350 ongoing nationwide protests. Previously, we wrote that ‘day 14’ was around June 11, and the recent rises started between June 10th to June 14th — testing lags might have accounted for this.
From a purely case perspective, the daily rises are most severe in Arizona, California, Texas (previously known) and new surges developing in:
– Oklahoma (days open 47)
– Oregon (47)
– North Carolina (40) and South Carolina (44)
These states have been open for varying number of days, but the rise in cases has been gaining momentum in recent days. We have marked with red lines, the states where a pronounced change of trend is seen.
– One state to watch is Arkansas. We have been writing about the sustained surge in cases in AR and it sure looks like it accelerated in recent weeks, but now seems to be bending downwards.
– If AR case trends bend downwards, this state could be a leading indicator.
– AR has 4,509 cases per 1mm residents (vs ~19k for NY/NJ) or one-quarter the prevalence.
But if the state sees cases plateauing at this lower level, it would be encouraging.
Fortunately, neither deaths nor hospitalizations are surging in the same manner…
And if we were to mark trends on the hospitalization side, there are not that many states where “gross admissions” are surging and only 3 are marked below:
– Arkansas, although this one looks like it is bending downwards now
– Utah
– Alabama
There are some states which report only “net hospitalizations” (admissions less discharges) and those are marked in grey:
– some “net hospitalization” states are seeing a steady flow of admissions (TX, but this admission rate) is not necessarily surging. But it bears watching.
POINT #3: Both Texas and Florida are ‘course correcting’ which is wise, and a better option (our opinion) than rolling back the easing of restrictions…
States need to course correct, but “shutting down” is not really the practical, nor ideal solution…
For the states seeing a rise in cases, the cause of this rise is not necessarily singularly important. But the reason for the rise does inform of the policy path forward. And the ultimate question is whether policymakers pause or even rollback some of the eased restrictions or should states ‘course correct’ and manage case growth, by adding restrictions (such as masks) or enforcing social distance restrictions.
Texas course correction with Bars/Restaurants…
We have written about Texas a few times in recent commentaries, because of the state’s persistent rise in cases. And as we referenced above, some of this could be explained by imported cases. And these imported cases are contributing to the spread throughout the state.
Source: COVID-19 Tracking Project
Here is some good color from a client who shared the following comments from a doctor in San Antonio. That Texas is seeing a rise in cases, part of it is due to younger people heading out. And hospitals are now busy with “regular health” emergencies/cases as well.
Source: Fundstrat client
TX Gov. Greg Abbott commented that majority of new cases are under age 30
Texas Gov. Greg Abbott commented on the youth (age) of newer cases and he is not entirely sure of how these infections are taking place — Memorial Day? Bars? other?
Gov Press Briefing https://www.theeagle.com/news/state-and-regional/abbott-blames-20-somethings-for-some-of-the-latest-increases-in-coronavirus-cases/article_e37ced83-04bd-5b96-8264-95f377fde6e3.html
Fortunately, Texas is ‘course correcting’ issuing a bulletin on Wednesday, reminding bars/restaurants to enforce its checklist
This same client also shared this bulletin that the Texas Alcohol Beverage Commission put, reminding licensed bars/restaurants about the checklist requirements to meet compliance. In fact, it is reminding businesses to meet these requirements or risk getting shut down for 30 days (first infraction). Among the guidelines of ‘Open Texas’ (see below)
– 6 feet of distance
– No tables >10
– Discourage close contact, such as dancing
– Disposable menus, etc.
Clearly, this is a healthy step. Texas should be taking some actions (masks would be ideal). And bar/restaurants would face temporary closure without compliance.
https://www.tabc.state.tx.us/coronavirus/files/TABCBarAndRestaurantEnforcement.pdf
The checklist referenced in the letter is below, from the TX govt website.
https://open.texas.gov/uploads/files/organization/opentexas/OpenTexas-Checklist-Bars.pdf
Florida is seeing a rise in cases, but Governor pledged to keep state open…
https://www.usatoday.com/story/news/nation/2020/06/17/florida-governor-ron-desantis-keeping-state-open-coronavirus-cases-rises/3210417001/
Florida is highlighting a different type of patient, which is why hospitalizations are down…
Cases are rising in Florida, but gross hospitalizations are not necessarily following the rise in cases. This is less due to a lag effect and we believe it is due to the changing nature of the cases. As FL Gov. Rick DeSantis highlights, newer infections are younger people not requiring hospitalizations.
Source: COVID-19 Tracking Project
The median any of a patient is now 37 vs 65.5 in March… huge difference and this age difference likely explains why hospitalizations have not risen. In fact, the Governor highlighted how their expanded testing is capturing and detecting more cases.
Source: Gov office
There is some validity to the statement, given the fall in gross hospitalizations. And even fatalities are down in Florida as this chart shows.
Source: Gov office
I found their testing studies quite interesting. I am not clear if these are serology or PCR tests. But the bullet below shows they are testing asymptomatic people and I was surprised at the results.
Source: Gov office
Shockingly high prevalence rates in the clusters tested…
The rate of positives is quite high. Look at the watermelon farm in Alachua County, where 90% of workers tested positive. And in the press briefing, DeSantis noted that none of those workers had symptoms.
– And the “central FL” airport (MCO or Tampa?) saw 52% of the 500 workers tested with COVID-19
– 63% of prison employees were tested positive
All in all, these clusters highlight how the prevalence can be quite high and interesting how few of these workers have/had symptoms.
Source: Gov office
