Click HERE to access the FSInsight COVID-19 Daily Chartbook.
STRATEGY: Equity markets pushing against new highs…
There are two areas where we could see significant developments. The first is the trend in US cases which collapsed to 32,132 (ex-TX reporting ~5,000 backlog cases) on Monday. The other is the progress on the fiscal package, aka CARES 4 relief bill. Passage of a bill by Washington is needed and critical, and we expect markets to find cheer if we see progress this week.
– Daily cases are falling throughout the US;
– The epicenter, FL, CA, AZ, TX, or F-CAT, is well past peak;
– AZ down 90% vs peak;
– TX down 80% vs peak;
– FL down 75% vs peak;
– even CA, with polluted data is down 45% off its peak
Source: COVID-19 Tracking Project and Fundstrat
It also looks like the distortion from CA >300,000 test backlog is behind us. CA Governor Newsom yesterday suggested the backlog is done (see below), and as such, we can look at the data this week as “clean.”
https://www.youtube.com/watch?v=uvkkZZELToo
And our Head of Policy Strategy, Tom Block, believes a deal with Washington is not necessarily as difficult to get done. He believes there is quite a lot of common ground (see below). But he also wonders if the Democrats are “overplaying” their hand.
As we noted last week, there is a high level of apprehension around stock prices as they approach new highs. In short, many investors suggest “the stock market defies logic because we are in the midst of a Depression, yet stocks are making new highs.” But as we all know, the equity market rarely makes sense (consistently). If I had to explain why stocks are making new highs, despite being in a Depression, the following would be among my observations:
– 75% of the S&P 500 is “Growth” and trade like bond proxies –> as long as rates are low, 75% of S&P 500 remains solid
– US economy has bottomed (likely), reflected in falling jobless claims and growth in employment
– ~$5 trillion cash on the sidelines
– Fed is easy and “don’t fight the Fed”
POINT 1: Daily cases collapse to 32,323…
Daily cases in the US collapsed. This is good news. There was no distortion causing this figure to look artificially low. And CA still has a backlog of cases, but it looks like Monday might be the last day of that distortion.
Source: COVID-19 Tracking Project and Fundstrat
The 7D delta of daily cases is showing the accelerating decline in daily cases. Daily cases are down 9,488 vs 7D ago, the best level in two weeks. And this could accelerate further once CA has its backlog eliminated. This could happen starting Tuesday.
Source: COVID-19 Tracking Project and Fundstrat
Few states are seeing a meaningful rise.
Notice all 4 F-CAT states are among the “largest decliners” list. TX had 5,200 cases in its backlog, but our data science team, led by tireless Ken, removed these 5,200 cases.
Source: COVID-19 Tracking Project and Fundstrat
POINT 2: F-CAT tracking NY tristate in total case decline… despite looser rules
The decline in cases in the US epicenter, FL, CA, AZ, TX, or F-CAT, is accelerating. We saw it this week. Even TX, with its 5,000 backlogs of cases, managed to be down vs 7D ago but its real case figure is 1,200. AZ had under 1,000 cases and is down 90% from its highs.
Source: COVID-19 Tracking Project and Fundstrat
Interesting, if you look at how F-CAT is tracking vs NY-tristate, it is a pretty good match. This is even more impressive given none of the F-CAT states shut down. They surely implemented stricter mitigation measures, but still managing to see a collapse in cases.
– this lends credence to the argument that case prevalence >12,500 per 1mm is when we see overall disease path slow
– if true, this might suggest there is something akin to herd immunity
– and if so, perhaps reduces the risk of “back to school”
Source: COVID-19 Tracking Project and Fundstrat
The total detected case prevalence, or cases per 1mm residents, in F-CAT has converged with that of NY tristate. And if NY-tristate is seen as having some type of herd immunity level of spread, we think this is starting to apply to F-CAT.
The chart below is a measure of the breadth of improvement in cases. We plot what % of the US has daily cases down vs 7D ago. This figure peaked at 56% in early April. And as you can see below, when the line started to turn lower, we saw overall cases surge.
– since early August, this figure has surpassed 56%
– it fell briefly last week, due to CA backlogs, but it has since been improving.
Source: Johns Hopkins and Fundstrat
And another chart we are watching closely is what % of the US has cumulative cases >12,500 per 1mm, or a 1.25% confirmed detected case rate. Assuming that true infection is 10X, this implies a 1.25% prevalence is ~12.5% of the population with COVID-19. And we believe this is an informal line for when a community begins to see some slowing of spread — akin to herd immunity.
– if we also factor in up to 50% of the US has some type of T-cell immunity (see our past comments on this), a 12.5% prevalence + 50% T-cell immunity is about 62% total community
– that is what is viewed as the level of prevalence to gain herd immunity.
Source: Johns Hopkins and Fundstrat
POINT 3: The obvious risks around “back to school”
As we near the end of August, the challenges of back to school are at the forefront. COVID-19 is currently in retreat and back to school brings with it the obvious risks –> mass gatherings, community transmission risk to older adults (teachers) and family. But online school has logistical challenges for working parents. There is simply no easy answer and there is also not a lot of science to support arguments either way. Back to school is going to be a “live fire” exercise and policymakers will only know with hindsight, whether actions were appropriate.
Because of this, it makes sense that schools are tending to err on the side of caution. The following article echoes the sentiment of many out there — that back to school is simply dangerous and attempting this is a bad idea.
https://www.vox.com/2020/8/17/21371822/covid-19-prevention-kids-georgia-mississippi-texas
In fact, NBC News and other media outlets ran this story of an Oklahoma high school student who attended classes yesterday, even while aware of testing COVID-19 PCR positive. It turns out, this student mistakenly thought the lack of symptoms meant there was little risk of spread.
https://www.nbcnews.com/news/us-news/oklahoma-high-school-student-knowingly-went-class-coronavirus-officials-say-n1236895
This type of knowledge error is likely quite common. After all, states have each taken different tracks regarding COVID-19 education and mitigation/distancing measures and it should therefore not be surprising if Americans in every state have a different understanding of the disease. But it surely seems difficult to depend upon students and parents to police the healthcare risks. Even during normal flu season, parents often send their sickened child into school, often not out of ignorance but convenience.
For college and higher education, the back to school challenge is managing social distance while on campus. There have been multiple stories over the weekend about the large crowds that have gathered on undergraduate campuses across the US.
https://www.washingtonpost.com/nation/2020/08/17/alabama-georgia-college-parties-covid/
Sweden is going back to school today, without advising the use of masks…
Sweden is also going back to school today. That nation was unique in its COVID-19 response, by keeping much of the country open and without requiring strict mitigation measures. And now, their students are going back to school.
https://www.archyde.com/coronavirus-in-sweden-back-to-school-without-a-mask/
The path taken by Sweden, while controversial, managed to keep their economy largely open. And despite this relative freedom, total cases per 1mm residents in Sweden is only marginally higher than Spain (see below). In fact, Sweden even managed to see fewer cases per 1mm residents than Singapore. Thus, while many hold up Singapore as a case of good containment, Sweden has outperformed.
Source: Johns Hopkins
And colleges are responding by moving to “online” for the foreseeable future. Columbia University announced this last week, just two weeks before classes begin. And it looks like UNC-Chapel Hill made this same decision today.
https://twitter.com/revshark/status/1295469136596873217?s=12
https://www.usatoday.com/story/news/education/2020/08/17/unc-chapel-hill-covid-cases-fall-semester-online-classes/3383874001/
Regarding college campuses, I have mixed feelings. A college campus is already a largely closed eco-system and if students remain on campus, the risk of broader community transmission is somewhat lower. And undergrads are likely far less likely to develop the severe outcomes seen in older Americans.
Universities need to think about the structure of campus life. For American universities, campus life is central to the experience. Students living and going to class together. And this involves being social. Student’s tuition is used to pay for this campus experience. It does beg the question of whether students should be going to class, but have the professor lecture via a monitor or projection?
Israel kept schools open and as the chart above highlights, has a sizable nationwide outbreak, but with lower prevalence compared to the US and Brazil. While I have not seen a lot of media commentary on the disease the impact from Israel opening schools, this NY Times article is fairly comprehensive. They describe how educators in Israel regret being too open in their school re-opening approach. It is a long article but it discusses the same challenges the US will face, including masks within classrooms, etc.
https://www.nytimes.com/2020/08/04/world/middleeast/coronavirus-israel-schools-reopen.html
Israel school begins again September 1. And there some new recommendations for the managing school:
– limit group sizes, and limit contact between groups
– staggered schedules
– sanitizing classrooms
– better ventilation
– mask use and proper mask use
https://www.nytimes.com/2020/08/04/world/middleeast/coronavirus-israel-schools-reopen.html
