COVID-19 UPDATE: On the margin, daily case "rate of increase" slowing = good. Epicenter 82% (200 points) upside, and 26% market cap Array ( [cookie] => 596a25-805399-724db3-06fc84-1cfaa6 [current_usage] => 2 [max_usage] => 2 [current_usage_crypto] => 2 [max_usage_crypto] => 2 [lock] => 1 [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 208285 [user_id] => [reason] => [method] => ) 1 and can accesss
STRATEGY: Tide seems to be turning in favor of "half-full"
We are only mid-week but it does seem like the cadence of incoming data has turned favorable, after 4 weeks of worsening COVID-19 cases and re-opening risks:
- Daily US cases are rising at a slower pace
- F-CAT daily cases are plateauing and not much left of the US to "burn down"
- Good news on the vaccine front with Moderna and others
- Stocks are bumping up against cycle highs
This week is a reminder of the importance of binary outcomes and how this "flips" what works...
As we noted yesterday, the Moderna news is a reminder of how "binary" catalysts exist. We have cataloged a few of the potential catalysts, and its impact on investor positioning.
Vaccine developed
- Epicenter/Cyclicals --> BOOM
Cure/ antibody treatment
- Epicenter/Cyclicals --> BOOM
F-CAT cases peak
- Epicenter/Cyclicals --> BOOM
Second wave NY tristate
- Stay at home --> BOOM
White House gets coronavirus
- Stay at home --> BOOM
- Defensives --> BOOM
Deaths begin to rise
- Stay at home --> BOOM
Epicenter stocks were suffering since June 9, 2020 suggests equity markets were losing faith in disease path
As the chart below shows, the epicenter stocks (Discretionary, Industrials, Energy, Financials) suffered a slow bleed since June 9th. That is the date that US cases began to creep up.
And this rotation out of "epicenter" will quickly reverse on one of two factors:
- F-CAT cases peak (AZ, TX look like so)
- Vaccine/cure is developed
Source: Fundstrat
Recent McKinsey analysis underscores the "binary" impact of vaccines...
McKinsey recently published an analysis of when various sectors are expected to recover to 2019 levels. They have two timelines. One for virus-contained (including vaccine) and one for muted recovery. We marked these with arrows. There are huge differences between when a group is expected to recover under the two scenarios.
- hence, the binary effect of vaccine or F-CAT peaking.
- this dramatically shortens the timeline for recovery.


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