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STRATEGY: Presidential Debate was kind of lame
Going into this first Presidential debate, I expected this to be a key moment for the 2020 elections. Because it would be a chance for voters to see the candidates side by side. If someone asked me who performed better, I would say VP Joe Biden (forgive me Tom Block, if I erred). But I also thought this debate was lame.
Biden proves he is going to be good for the economy if he wins, with his economic program.
But the “tax gotcha” and “pandemic failure” did not really seem to stick on Trump.
So, I think this was a win for Biden, but not really a loss for Trump. Does that make sense?
Equity markets are suffering from poor visibility jitters. I still don’t see how anyone can say there should be a wildly different market outcome in 2021 between a Biden vs Trump White House. In fact, I did a webinar with Tom Block yesterday with the CEE group and Tom Block only affirmed this. He thinks both have similar economic initiatives, and similar on trade. But Biden would be more pro-immigration and pro-environmental. Neither of the two would really affect markets.
On COVID-19, the negative surprise yesterday was NY/NYC which reported a surge in cases and positivity rate. Enough so that NY state reported 1,189 cases, making it top 10 in the US for the first time since May. While NY Gov and NYC Mayor were quick to blame the orthodox Jewish community, I think this is also lame, to an extent. The cases are rising because Americans are losing fear and becoming careless. This is what Dr. Chris Murray of the IHME feared. In the meantime, most colleges are doing quite well.
But what bears reminding is, even as US cases are rising (and tests are up), daily deaths are falling. Below is the 7D delta in daily confirmed cases and the 7D delta in daily deaths. Notice how cases have risen for most of the past few weeks.
– yet daily deaths delta is down down down
Source: COVID-19 Tracking Project
As for markets, the key line in the sand is S&P 500 3,224 and we expect markets to be somewhat tricky given the uncertainty around the election. But a lot of bad news is priced in. And I think stocks look very good under either administration.
POINT 1: Daily cases rising vs 7D ago, NY case rise contributing to this
Daily new COVID-19 cases came in at 37,131, which is up 4,265 vs 7D ago. Daily cases are rising across the US. There are many potential explanations for this rise in cases, but the primary takeaway, for me, is that Americans are getting more relaxed about COVID-19 and this is raising the risk of spread. This is what seems to be happening in NY and NYC.
While NY Gov Cuomo and NYC Mayor DeBlasio are spotlighting the orthodox community, this seems a convenient explanation. And if this was true, then this should be seen more widely across the US, since the orthodox community is found throughout the US. So, it could be a factor, but I think this is due to Americans become more lax about restrictions.
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 daily cases jumped on Tuesday and this is a notable rise compared to other days.
Source: COVID-19 Tracking and Fundstrat
Looking at the tiers of the US states, in the past 7D, the largest contributor to case rises are those 22 states still facing an outbreak. But the more troubling statistic is the rise in the NY tristate area (+MA +RI).
Source: COVID-19 Tracking and Fundstrat
Positivity rate 5.0%, higher vs Monday but still trending lower…
The positivity rate came in at 5.0%, up from 3.4% yesterday but the 7D moving average is still pointed downwards. The next few days will be important.
Source: COVID-19 Tracking and Fundstrat
If we look at the impact of testing, there were 6% more tests (vs 7D ago) administered but there were 13% more cases. So this means the incremental tests positivity rate was 9.8%
– But this is primarily due to NY-tristate (+MA+RI) as the 7.4% rise in test detected 72% more cases.
– Thus, ex-NY tristate, the positivity rate would have actually fallen.
Source: COVID-19 Tracking and Fundstrat
Source: COVID-19 Tracking and Fundstrat
POINT 2: Don’t “Rosh” to judgment, surge in NYC cases highlights risk getting too “comfortable”
The metropolitan NYC area, including surrounding counties, is seeing a resurgence in cases. This caused quite a lot of concern in markets yesterday, and raises some real concerns:
– NYC has seen very little COVID-19 activity since the April/May surge, why now?
– NYC est. infection prevalence was as high as 25%, why more cases?
– NYC has been the most restrictive on its re-opening since April/May, was it smart policy?
– NYC has seen major firms recall workers, is this the driver?
– NYC started in-school primary school yesterday, is this a mistake?
So you can, the concern about NYC is justified. And given so much of the financial markets are centered in the NYC area, this carries extra weight for markets.
Both NY Governor Cuomo and Mayor DeBlasio were quick to paint this as an “orthodox” issue, but the broader issue is NYC getting too “comfortable”
I think the initial commentary was to point to certain counties and communities as the source of the outbreak. For instance, Gov Cuomo made these comments at his press conference yesterday (Tuesday am). And he noted he wanted to speak with the Orthodox Jewish community leaders, because he felt this was the source of the outbreak.
Source: NY Dept of Health
This has been a simmering issue for some time. On Sept 25th, for instance, NYC Mayor DeBlasio was already trying to persuade Orthodox Jewish leaders to comply with existing NYC guidelines (masks, limiting group sizes, etc.).
Source: NY Times
Below is the best argument for why this is less due to the Orthodox community, and more due to the overall movement of people…
While it is convenient for NY Governor and NYC Mayor to lay the blame on a community, we spoke with many members of the Orthodox community. Two of the best comments we received are below.
– first point is Orthodox Jews have been going to synagogue all Summer and there was no outbreak
– second comment points out that it is “back to school” is what is leading to cases affecting families
Ultimately, NYC is indeed seeing daily cases beginning to rise. And we know that there is a large increase in overall human interaction given:
– NYC major banks recalling workers
– NYC public schools start in-person classes Tuesday
– NYC about to open restaurants for in-room dining 9/30
So, this is going to raise a lot of questions from many about the soundness of the policy, from both sides of this issue. For those who are in favor of restrictive measures, cases are rising even for restrictive measures are lifted. For those who wanted to liberalize faster, this raises the question of why NYC remained restrictive for so long.
Source: NYC Dept of Health
So the key takeaway for me is the NYC is a reminder that Americans do better when they are “scared” — this is a point made by Dr. Chris Murray of the IHME, who said that as Americans get comfortable with COVID, they start to let down their guard.
– I think this is the key point
– NYC is a reminder we need to be vigilant
– I think NYC gets the message and I am less concerned about a massive second outbreak
As for masks, look at some of the comments in response to NY Gov Cuomo’s comment about “wear a mask”
Source: twitter.com
Source: twitter.com
Source: CDC
POINT 3: Two most important states in next two weeks –> FL + NY
From a perspective of COVID-19 case trajectory, the next few weeks will really matter, and the two states that bear the most watching are NY and FL. Why?
– NY and NYC metro area has seen a resurgence in cases which really raises questions on whether restrictive lockdowns worked
– FL because the state lifted all restrictions last Friday
As you can see below, FL case prevalence is among the highest among the major US states with 32,000 cases per 1mm residents compared to 22,000 for NY. And of course, if NY is seeing a resurgence, NYC remains highly restrictive, so there are not many further restrictions that can be placed.
Source: Fundstrat
But NYC is seeing additional human interaction as primary school in-class teaching is set to start.
Source: NY Times
And with winter approaching, the prognosis for many NYC businesses is grim and might get grimmer. So how NYC handles this renewed resurgence in COVID-19 cases is important. The challenge for policymakers, as I noted, is this city has remained among the most restrictive, and yet, cases seem to be rising again.
https://www.bloomberg.com/news/features/2020-09-29/new-york-city-bankruptcies-2020-pivotal-point-for-business-as-covid-cases-rise
And for Florida, we think it will be only a matter of days before we start to see the impacts of essentially no restrictions. The issue is that as Americans feel more comfortable, we all get a bit more careless. So, I would expect this to result in a surge in cases. And hopefully, deaths do not rise commensurately.
Source: Sun Sentinel
But the economic carnage also cannot be ignored. The best case would be for the US to have few cases, and also a vaccine/cure around the corner. But this is not the reality. And as shown below, Disney is making huge cuts to its workforce. So, there is a practical issue of how an economy can remain viable when businesses are closed.
Source: CNBC
Obviously, this could work both ways. If daily cases, hospitalizations and deaths do not surge, we could be positively surprised. This is why FL and NY are the two most important states to watch over the next few weeks.
And hopefully, we don’t have too many people doing bad things.
Source: Sun Sentinel
Source: Orlando Sentinel
