COVID-19 UPDATE: Rise in college COVID cases stalling improvement but FL and AZ break the rule. S&P 500 13% above 200D, since 1900 = positive

Click HERE to access the FSInsight COVID-19 Daily Chartbook.

College cases surging = bad.  But FL and AZ “exceptions to the rule”
The meaningful improvements in case trends in the US could be stalling as the last two days, we have seen COVID-19 cases flat vs 7D ago.  This seasonally adjusted (weekday adjustment) show that the case figures for Wednesday (yesterday) and Thursday (today) are flat vs 7D ago.

Source: COVID-19 Tracking Project 


University cases likely causing a rise in COVID-19 cases…
The two states with the largest increase are Iowa and Alabama.  And there have been widely reported outbreaks at several college campuses in Alabama (see below).  And Iowa today took an emergency measure to close bars.  So, both states are aware of these surges and hopefully are taking sufficient corrective measures.  

Source: COVID-19 Tracking Project


Iowa today announced an emergency measure to close bars in the 6 counties seeing a surge in cases.  These are counties with colleges and universities. The two biggest universities in Iowa are Iowa State University (Story County) and University of Iowa (Johnson County).

Source: Iowa Governor’s office

And Alabama surge in cases seems to be stemming from its colleges.  Below is a Washington Post story about the University of Alabama in Tuscaloosa, which has >20,000 students on campus currently.

https://www.washingtonpost.com/education/2020/08/25/college-coronavirus-cases/


Colleges are going to struggle to contain COVID-19 cases.  I am not sure if it is possible for cases to be zero on a campus. The reason is due to the existing prevalence of COVID-19.  This table shows our calculation for how many Americans are “contagious” at any single time, based on assumptions of infections vs detected (4X greater) and # days contagious.

– at current case levels, about 1 in 471 has COVID-19

Source: Fundstrat


Thus, if we look at the University of Alabama and its 20,000 returning students.  Using these same assumptions, we estimate that 30 to 40 of the returning students were contagious when they arrived on campus.  Thus, the campus was not likely “COVID-19 free”

– however, the key is keeping the R0 <1.0. 
– when students were at “home” it was likely easier to mitigate the spread

Source: Fundstrat 

The NY Times has a great tracker for these cases on campus.  Below is the map of the cases tracked so far across >700 colleges.

Source: NYTimes


The top 10 schools are shown below and you can see, Alabama schools are near the top of the list.

Source: NYTimes 

Picture not entirely bleak — Arizona and Florida have many large colleges and universities, but their case trends are improving…
But this picture is not all negative.  Florida and Arizona have large schools but there has not been a major new wave of cases reported.  So, there may be some basis to believe that once a community reaches a sufficiently high level of case prevalence, COVID-19 spread naturally slows.


RNC perspective…
Our Policy Strategist, Tom Block, gave us his perspective on the RNC night 3 (tonight is the final evening).  He gives the RNC vastly higher marks on night 3.  From his perspective, both night 2 and night 3 were strong.

By the way, this comment from Nate Silver struck a chord with me, given the apparent politicization of many facets of COVID-19.  As he points out, a comment regarding short-term immunity usually reveals a political taint.

https://twitter.com/NateSilver538/status/1299088150741090305




STRATEGY: Abbott testing announcement again proves many epicenter stocks have “binary reaction” to healthcare developments…
Abbott Labs announcement of a quick 15-minute COVID-19 PCR test is viewed by many as a game changer.  The reason is that this cost-effective and very fast test allows much faster case detection, which in turn, better disease management.  

Source: twitter.com


Any positive developments on healthcare, whether vaccine, cure or testing, improves the safety of the US and the safety for Americans to leave their homes.  Thus, this has a positive effect on the stocks most hurt by this pandemic.  Below is our simplified graphic of companies that have a binary benefit from healthcare developments.

– it’s a reminder that many epicenter stocks have a binary reaction to healthcare developments.
– basically it’s travel and leisure stocks.  even OTAs.

Source: Fundstrat




POINT 1: Unfortunately, college cases seem to be rising enough to slow improvement in COVID-19 trends…
USA COVID-19 cases came in at 44,543, which is +788 higher vs 7D ago.  So, there is a clear “stall” in the pace of improvements.

– as we discussed above, it seems like college students return to campus is fueling another round of cases.

Source: COVID-19 Tracking Project


Again, the daily change vs 7D ago, in our view, is the leading indicator as it is what influences the 7D moving average.  The last 2 days have seen daily cases flat/up vs 7D ago.  So the major pace of improvements seen in the past few weeks are stalling.

Source: COVID-19 Tracking and Fundstrat

Source: COVID-19 Tracking and Fundstrat



POINT 2: 40% of the US counties (based on Pops) has cases 75% off its highs…
The number of US counties with cases 75% of its highs is about to reach a new high. As shown below, this last peaked in early June.  And we know that when this line began to roll over, the trends in COVID-19 were worsening.

– this is based upon county-level data so it gives us a clearer picture of the actual trend
– the fact this is rising suggests more counties are seeing a BIG retracement in COVID-19 cases.

Source: Johns Hopkins 

And this is consistent with the trends we are seeing in daily cases.  Below are the composites for the US states, based on our prior commentaries.  This determination was made on 8/18, or 10 days ago:

– NY tristate + MA + RI (light blue)
– Current epicenter, FL, CA, AZ, TX, or F-CAT
– 18 states cases >12,500 per 1mm (close to herd) (grey)
– 29 states with low case prevalence (red) (as of 8/18)

As you can see, the F-CAT daily cases have utterly collapsed.  And the 18 states with high prevalence are also rolling over.

– if there is a stubborn trend higher, it is the “red” line which are states with current low case prevalence.  These are vulnerable states.

Source: COVID-19 Tracking Project


To see this trend, we listed the composite states side by side.  As you can see, F-CAT and the 18 states have seen a sharp drop.  But the 29 states have not yet seen a similar decline.

– the peak in these states is almost the exact same date, though.

Source: COVID-19 Tracking Project


I think these 29 states composite (as of 8/18) are actually seeing an uptick in cases.  This is likely also being fueled by back to school.  These 29 states have a case prevalence <12,500 per 1mm, which as we have written in multiple commentaries, is the informal infection breakpoint we previously tracked.

Source: COVID-19 Tracking Project


Since 8/18/2020, there are now only 16 states with cases <12,500 per 1mm….
There are now only 16 states, vs 29 on 8/18, with cases <12,500 per 1mm.  So, this is good news, in a sense.  After all, we are not seeing a surge in cases in Florida or Arizona, even as these states have many colleges and universities.

Source: COVID-19 Tracking Project

POINT 3: S&P 500 13% above 200D mavg.  Since 1900 = bullish. Not insane until 3,756
The rise in the S&P 500 has been relentless since March.  This breathtaking rise has also brought on bubble talk.  There is certainly intense and elevated interest in stocks today, especially compared to the last decade.  And it is in part because this consistent rise in stocks has been rare in the past 5 years.

This tweet by Liz Ann Sonders of Charles Schwab @LizAnnSonders caught my attention today because it is a “silent” warning about how extended some people perceive equities to be.  She is looking at the “absolute delta” of S&P 500 vs its 200D.

https://twitter.com/lizannsonders/status/1298936499732385792?s=12


We asked our hard-working summer intern, CJ Woodberry, the CS Dartmouth undergrad, to crunch some numbers for the S&P 500 vs its 200D. He was able to calculate this data since 1897, or ~120 years.

– At the close, the S&P 500 is 13% above its 200D, or 1-std deviation above long-term averages
– Since 2015, this was only seen once, February 2018.
– In 2018, it was a warning sign.

Source: Fundstrat


If we look back at the 120 years of history compiled by CJ, being 1-std deviation > 200D is a sign of a strong bull market.

Since 1900, S&P 500 has spent >10% of its day 1 std-deviation above its 200D, usually sign of a “strong bull”
But since 1900, the S&P 500 has been above this level multiple times as this chart shows.  In fact, this chart shows that 1-std above its 200D is pretty benign and common.

– Since 1900, the S&P 500 has been >1 std-deviation above its 200D more than 10% of the days
– So while it is the first time in 5 years, this is quite common.

Source: Fundstrat


At 2 std-deviations, S&P 500 would be ~3,750, which is lots of upsides…
CJ pulled some numbers together.  And as you can see below, when the S&P 500 is in the upper deciles of its P/200D range (see top two lines), the forward returns are actually quite strong.

– Being above its 200D is a sign of strength
– Forward 12M returns are actually quite strong, since 1900

Source: Fundstrat