This is one of the most depressing headlines I have read since the start of this pandemic. The “CDC says the U.S. has ‘way too much virus’ to control pandemic” — and many Americans feel this way. The COVID-19 virus is spreading at an alarming rate across the U.S. and the exact cause is not entirely clear.
https://www.cnbc.com/2020/06/29/cdc-says-us-has-way-too-much-virus-to-control-pandemic-as-cases-surge-across-country.html?__source=twitter%7Cmain
But as the saying goes, the “exception proves the rule” and I am using it in a convoluted sense. Diseases reach a “break point” which does not mean the same thing as “herd immunity.” What I mean to say is that COVID-19 spread can begin to slow sharply even without infecting 100% or 60% of its residents. Two examples I want to cite:
– First, NY/NJ continue to see an utter collapse in cases
– Second, Arkansas and Missouri, which were among the most liberally open states, no mask policy and saw a parabolic surge in cases since late-May have both seen a pronounced downturn in cases
Take a look at the daily reported cases for NY/NJ.
today 1D ago Delta
New York 391 vs 616 -225
New Jersey 90 vs 309 -219
As for AR and MO, neither state “course corrected” and continued to move forward with openings. So, like F-CAT, these states saw massive rises in cases after late-May (aligns with BLM protests). And as you can see, their case figures have improved in recent days. Arkansas peak in daily cases is >2 weeks ago on 6/12/2020. Thus, these exceptions “prove the rule” (we realize it is not the most appropriate use of the phrase, but you get the picture).
Source: COVID-19 Tracking Project
STRATEGY: If F-CAT patterns after NYC and set to peak <2 weeks, stocks should be bottoming
We discussed this timeline yesterday and thought it worth repeating:
– NYC saw daily cases peak 4/10/2020 and NYC was the original epicenter
– S&P 500 bottomed 3/23/2020, or 17 days prior to the NYC peak in cases
– F-CAT is about where NYC was in late-March (dates slightly vary, see our report yesterday)
– S&P 500 should be bottoming soon
We also think the quarterly rebalance-related selling is done soon (6/30 Tue). And with the solid incoming economic data, the case for equities is still strong. Moreover, Deep Macro, our favorite big-data macro forecasting firm sees June payrolls at 3.6mm, well above consensus of 2.5-3.0mm (see below)
POINT #1: Daily cases pause from parabolic rise +35,778 vs +39,237 1D ago as F-CAT down…
This is a “half-full” day as new confirmed daily cases came in at +35,778, which is -3,459 vs 1D ago (but still +9k vs 7D ago). The F-CAT states mostly had lower case figures, which is a good thing:
California 5,307 vs 4,810 (1D) +497
Florida 5,266 vs 8,530 -3,264
Arizona 625 vs 3,857 -3,232 (WRONG, as some labs missed deadline)
Texas 4,283 vs 5,357 -1,074
Total F-CAT 15,481 vs 22,554 -7,073
So as you can see, the F-CAT, the new “epicenter,” is taking a breather from their parabolic rise. As we commented yesterday, we expect these states to track NYC and peak within the next week or so.
Source: COVID-19 Tracking Project
Sonora Quest missed the deadline for Arizona report and is 80% of state’s testing…
The improvement is not as good as it looks at first glance, as Arizona’s results are too low, we believe. That is, the Sonora Quest lab, accounting for 80% of the state’s testing missed the deadline.
– This will be fixed by Tuesday.
https://ktar.com/story/3347600/with-incomplete-data-arizona-reports-625-coronavirus-cases-0-deaths/
6 states reported a sizable increase
Alabama 1,734 vs 358 (1D) +1,376
California 5,307 vs 4,810 +497
Mississippi 675 vs 361 +314
Missouri 468 vs 314 +154
Maryland 477 vs 327 +150
Utah 564 vs 472 +92
Total 6 states +2,583
6 states report a sizable decline
Florida 5,266 vs 8,530 (1D) -3,264
Arizona 625 vs 3,857 -3,232 (lab missed deadline)
Texas 4,283 vs 5,357 -1,074
North Carolina 1,342 vs 1,605 -263
New York 391 vs 616 -225
New Jersey 90 vs 309 -219
Total 6 states -8,277
Source: COVID-19 Tracking Project
POINT #2: Liberal openings: Arkansas and Missouri “exceptions that prove the rule”
Arkansas and Missouri have among the most liberal states, with “no required mask” policy… Both states were among the earliest to re-open and Arkansas actually never really had a formal “shelter-at-home” order. And regarding PPE:
– Arkansas does not require any use except restaurant staff (5/11)
– Missouri “encouraged” use but has no formal policy
What makes these states interesting is that their case figures were fairly stable, despite being open since March (largely) but went parabolic in early June (aligned with BLM protests). And yet neither state course corrected. And even without this, their case figures:
– went parabolic after late May
– Arkansas daily cases peaked on 6/12/2020 and since been declining
– Missouri cases peaked on 6/25/2020 and since been flat/declining
Thus, these two states are the “exception that proved the rule” in the sense that after a parabolic episodic increase, these states did not course correct and yet cases peaked. As we commented yesterday, we see an analog with F-CAT in the coming weeks.
Arkansas remained opened, saw flat cases until early June, then parabolic and have declined since 6/12/2020… without a course correction
Arkansas cases were fairly flat from March to late-May. But in early June cases went parabolic (which aligns with the BLM protests).
The state did not take any further mitigation measures but continued with its re-opening. And interestingly:
– Daily cases peaked on 6/12/2020 and have steadily declined
– Daily deaths peaked on 6/17/2020
Missouri has not course corrected, but after a parabolic rise, daily cases have begun to decline since 6/25
Similarly, Missouri had fairly stable daily cases figures and these went parabolic in early June (BLM alignment) and the state stayed the course, without course correction:
– Daily cases peaked on 6/25/2020 and have declined steadily since
– Daily deaths look like it peaked on 6/18/2020 as well.
POINT #3: Economic resilience, even if F-CAT remains in “pause” per Deep Macro.
Deep Macro, the economic macro forecasting firm which uses big-data is calling for a pretty sizable June payroll upside beat. Jeff Young expects 3.6mm private jobs added in June, well ahead of the consensus of 2.5-3.0mm. He cites a few factors, but the two most important are:
– consumer activity continued to recover at a brisk pace, even ex-F-CAT (see bottom section)
– online job posting surged again in June (covering survey period) but the strength is in “newly” opened states.
Thus, this is a sign of broadening activity.
Source: Deep Macro
As he notes, the largest increase in online job postings is in states that re-opened later (ala Northeast). Thus, this is an additional lift factor.
And retail and restaurant visits are climbing back steadily as their data tracking based on cell-phone location. This is pretty encouraging.
The upside beat on payrolls adds to an already solid economic beat over the past few weeks. Even today, we saw very good pending home sales gains (+44.3% vs expected +19.3%) and even the regional Dallas Fed Manufacturing Survey showed -6.1 vs -21.4 expected. The ISM for June will be on July 1 and the Street is looking for it to be a touch under 50 (49.7).
Source: Bloomberg
