Click HERE to access the FSInsight COVID-19 Daily Chartbook.
Overall, this was a very good past few days for COVID-19 data. The new daily COVID-19 cases Monday fell to 27,178, the first sub-30,000 figure in 3 months and on the heels of many counties showing widespread improvement — 44% of US counties (based on 7D avg) now see daily cases 75% off their highs. This is the highest reading since the pandemic started and higher than the 42% last week.
Of course, Labor Day weekend is also a test of the path of the virus. With back to school and many social gatherings, policymakers worry about a new surge of cases. But if we see continued case trend improvements over the next two weeks, this would be a very positive surprise. The future is uncertain and we have been surprised by the direction of trends, so we cannot hazard a guess.
STRATEGY: a taste of “violence of action” when (or if) epicenter gains traction…
The final two days heading into Labor Day weekend was a massacre for markets, with intense selling and lots of proclamations of “bubble talk” and “I told you so” — and this despite very good incoming economic data (jobs report solid).
– Markets were due for a pullback, so can anyone be surprised?
– But we hardly see this as a warning shot, there is just way too much cash on the sidelines
Money on sidelines has “barely” budged… and now down to “only” $4.5 trillion, from the peak of $4.75 trillion
The mountain of cash on the sidelines has diminished reluctantly somewhat and is down to a “mere” $4.5 trillion from $4.75 trillion.
– clearly, investors remain cautious.
– more cash on sidelines than versus Feb 2020 highs when it was $2.8 trillion
– going to Feb levels is $1.7 trillion of cash going into stocks
Is it any wonder stocks have massive upside still?
Source: ICI and Fundstrat
Epicenter stocks ROSE final two days last week…
The epicenter stocks actually rallied Friday. A decent proxy for “epicenter” stocks (aka hardest hit by COVID-19) is the S&P High Beta ETF, or SPHB. Our Head of Technical Strategy, Rob Sluymer, likes to use this ETF for the value proxy.
– this ETF rallied nearly 1% Friday
– so while there was a bludgeoning on FANG, this ETF boomed.
Source: CNBC
In the past 3 days, this ETF has outperformed FANG by 1,400bp, or +14% relative. This is a pretty staggering rally.
Source: Bloomberg
Reminder of the “violence of action” once the market believes the epicenter rally has traction…
Last week reminded us of a General Mattis doctrine of the “violence of action” — Mattis was speaking about his tactical warfare strategy, but the market moves reminded me of this. One of the great lines from “Generation Kill” (HBO series) is from Lt Col Stephen Ferrando, aka “Godfather,” who loves to quote Mattis. And refers to the violence of action.
Source: HBO
Last two “epicenter” rallies were +2,100-3,600bp but were “head fakes”… what if COVID-19 cases keep retreating + vaccine
The last two epicenter rallies (SPBH vs FANG) were stronger than the 1,400bp we saw in the past few days. But those were rallies on false hope as the cases were spreading across the US.
– this time, cases are organically retracing
– Phoenix, AZ is down 99% from its peak
– Miami, FL is down 92% from its peak
– vaccine development is progressing
Yup. Seems like it should have more legs this time –> MOON
Source: Bloomberg
Epicenter stocks are a binary trade if there is a vaccine…
And we remind investors that epicenter stocks, those hardest hit by the economic seizure and virus pandemic, are binary trades to any vaccine/cure as this table highlights.
Source: Fundstrat
We have listed our list of epicenter stocks based on the criteria:
– Global Strategy OW by Brian Rauscher
– Technical Strategy OW by Rob Sluymer
– Quant OW by DQM Model managed by tireless Ken
* Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile.
Source: Fundstrat
*Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile.
Source: Fundstrat
POINT 1: Daily cases crash to 27,178…below 30,000 is a huge milestone
For a while, it looked like the US COVID-19 case improvements stalled and we would be at 35,000-40,000 daily cases for some time. But over the weekend, daily cases crashed big-time.
– for each of the last 2 days, there was a sizable drop in daily cases vs 7D ago
– and no new outbreak in NY tristate nor Northeast
– and no new outbreak in 4 epicenter states, FL, CA, AZ, TX, or F-CAT
– but continuing rise in cases from states with low case prevalence
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. After seeing daily cases essentially flat for nearly 10 days, the last two days were good gains. Today saw daily cases plunge -4,171 vs 7D ago.
Source: COVID-19 Tracking and Fundstrat
Few states posted large gains today. In fact, only Michigan reported a notable rise in daily cases (Michigan didn’t report on Sunday, so the 1,156 new cases are the new cases over the past two days) but the rest of the top states were benign increases vs 7D ago.
We are particularly encouraged by CA, which saw cases fall to nearly 3,000.
Source: COVID-19 Tracking and Fundstrat
POINT 2: F-CAT and county-level show COVID-19 retreat > implied by USA cases…
As we have written multiple times in the past few months, If you want to get a sense for how quickly cases can retreat, take a look at the 4 cities at the center of the 4 states seeing the June-July surge — 4 states at the epicenter were FL, CA, AZ, TX, or F-CAT and the 4 nucleus cities:
– Los Angeles
– Miami
– Phoenix
– Houston
The chart below shows the daily cases. As you can see, all 4 cities are seeing the same rapid collapse seen in NYC after its peak. The only issue, however, is Los Angeles and Houston did not see daily cases per 1mm match the high levels seen in NYC at its peak. Thus, one could worry that those cities could have an elongated period of spread.
– Los Angeles -84% BIG
– Miami -92% BIG
– Phoenix -99% BIG
– Houston -64% EH
Source: Johns Hopkins
Cases are down 99% in Phoenix and 92% in Miami — those are absolutely astonishing statistics. And show that once COVID-19 reaches this break point, daily cases collapse.
California looks like it finally posted a downside break in cases. As you can below, this daily case figure of ~3,000 is a true breakdown on the downside for daily cases. This is also encouraging.
Source: COVID-19 Tracking Project
As commented above, COVID-19 case data improvement has stalled recently, with daily cases flat for the past 10 days or so (vs 7D ago) but hardly the rapid pace seen a few weeks earlier. Part of this is due to the rise in cases associated with returning students to colleges and universities. But another way to track the COVID-19 data is to look at county-level data and look at the population share (based on the populations of the counties) and see if daily case data is improving as rapidly.
This is what we look at below.
– the 7D moving average of US counties (based on Pops) with cases 75% off the peak is rising
– this means more counties are seeing a collapse in cases
– COVID-19 is retreating (% off highs) at the largest share since the pandemic started
This is a good thing.
Source: Johns Hopkins
Death statistics continue to improve. The metric we use it 4.3 deaths per 1mm residents, a metric that matches the level seen by NY tristate at their time of re-opening.
– 75% of the US is at this level and this share is steadily rising
– it is not at its best level, as this was at 90% in June
But we would be approaching this level soon. As you can see, this 7D moving average is rising rapidly.
Source: Johns Hopkins
POINT 3: Positivity rate is below 5%… whoa!!!!
The WHO has referred to a positivity rate of 5% as a key level and many states have viewed this figure as a key benchmark. Getting this figure below 5%, along with expanded testing, is seen as a level where the COVID-19 infection is fairly contained.
– the overall US positivity rate fell to 4.6% over the weekend, the lowest level in 3 months
– this trend continues to improve as well
Source: COVID-19 Tracking Project
Looking at the diffusion data, of the percent of the US with a positivity rate <5%, we can see that not only did it break above 50% for the first time in a few months, but the 7D moving average is also rising. So, this is showing a positive direction in positivity rates.
– organically, more states are seeing positivity rates <5%, which is a good thing
Source: COVID-19 Tracking Project
