COVID-19 UPDATE: F-CAT >80% prob TX already peaked, >60% AZ and >50% FL... CA still parabolic

Equity markets surged to start the week, and at first glance, one could say the weekend developments were better than expected, and thus, on the margin, risk on for markets.  This is becoming a pattern, where the absence of "bad" or even catastrophic news is resulting in a general upwards drift in markets.  And the incoming economic data remains better than expected -- a huge beat on June ISM Services at 57.1 vs 50.2 expected.  Both PMIs (manufacturing and services) are solidly back >50 and affirming the US economy has bottomed.

Taking a step back, when economy has bottomed, and stocks behave with an "underlying bid," we see this an overall constructive environment and one that allows stocks to surprise to the upside.  I still find it curious that many market skeptics cite the "high P/E" as a reason for caution.  At the bottom of a market cycle (which we are in) and when earnings are depressed, P/E is naturally going to be stratospherically high--that was the case in 2009 as well.

And there remain a few "binary" events that could cause the market to abruptly re-position:

- Healthcare cure or vaccine developed
- FL, CA, AZ, TX, or F-CAT, could see cases rollover and mark the apex of current wave in US pandemic.

>80% chance Texas is past the peak...
In our view, TX is already past the peak.  We discuss this in detail below (see commentary) but the high points are:

- Houston is the leading indicator, followed by Austin, San Antonio and Dallas
- Houston cases peaked 14D ago and are down 70% since (Austin ~80% decline)
- Positivity rate in Houston is now 11% vs 22% two weeks ago, even as tests 2X
- Houston case profile is tracking NYC shocking closely --> NYC took 18 days -75% and 32 days -90%

Thus, if Houston is past the peak and it was the center of the parabolic surge initially, then it is acting as the beacon akin to NYC in late March.


Source: Fundstrat and TX health dept.


Daily cases are up on Monday (see below) but it is mainly a "true-up" from CA.  And perhaps more importantly, daily deaths from COVID-19 remain in a downtrend.  Recall, US cases have been surging for several weeks now and yet, we have not seen a similar surge in hospitalizations (nationwide) nor in deaths.  

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