Click HERE to access the FSInsight COVID-19 Daily Chartbook.
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Please join us for an exclusive virtual conference as the leading strategists at FSInisght provide their insights into where the markets are headed and how to position your portfolio in a post-election world.
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Date: Thursday, November 19th, 2020
Time: 3:00PM – 6:00PM Eastern Time
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STRATEGY: Economic data rolling over—ironically positive, pressure for stimulus + keeping Fed dovish
Economic data is rolling over, as the surge in COVID-19 cases, Americans are naturally pulling back and we are seeing this show up in weakening economic data. The is not surprising at all, and have expected this as we move through wave 3. Yesterday’s report for October retail sales data shows a miss, of up 0.3% month-over-month, compared to expectations of 0.5%
– this is a sizable miss, and ex-Autos, is up 0.2% vs 0.6% MoM.
Source: Bloomberg
The most recent Chase consumer spending tracker, based on its credit card users, is showing a similar trend. Since early October, consumer spending has cooled, as caution leads to reduced activity levels.
The obvious question is why isn’t this rolling over of the data negative for the “epicenter” trade (aka cyclical stocks). There are a few reasons for this:
– financial markets not only look at near-term weakening data, but also the outlook in 2021, which has economic tailwinds
– vaccine and therapeutic progress is accelerating, arguably far more important than near-term economic data points
– weakening economic data puts more pressure on Washington to do a larger fiscal package = positive
– weakening economic data keeps Fed dovish = good
So you can see, ironically, rolling over of the economic data has positive implications for financial markets, at this time. This will not always be true. And we saw this with the positive gains posted by Epicenter stocks yesterday (SPHB ETF as a proxy).
– as shown below, after an initial big sell-off in the AM, dip buyers came in and pushed for positive gains by the end of the day
Source: Bloomberg
More Americans also seem willing to take the vaccine. The latest Gallup poll shows 58% of Americans will be willing to take the vaccine, up from 50% in September. This is good. There has been a lot of progress on a vaccine and the worst case would be Americans unwilling to take the vaccine.
https://news.gallup.com/poll/325208/americans-willing-covid-vaccine.aspx
https://news.gallup.com/poll/325208/americans-willing-covid-vaccine.aspx
In the meantime, COVID-19 is accelerating in wave 3. There is some potential good news. It looks like the 7D delta is finally rolling over. As shown below, the 7D delta in cases came in at 26,710, the lowest level in two weeks. In fact, El Paso, one of the worst hit cities in Wave 3 is showing signs that cases are now rolling over — way ahead of Feb 2021. See Point #2 for a discussion.
Source: COVID-19 Tracking Project and Fundstrat
But cases are also rising in the Northeast US. The MWRA, or MA Water Resources Authority, is publishing the latest wastewater analysis, and as shown, there is a huge pickup of detected COVID-19 in wastewater. This is a sign of accelerating spread in MA.
http://www.mwra.com/biobot/biobotdata.htm
Stay vigilant please!
ADDENDUM: We are attaching the stock lists for our 3 portfolios:
We get several requests to give the updated list for our stock portfolios. We are including the links here:
– Granny Shots –> core stocks, based on 6 thematic/tactical portfolios
– Trifecta epicenter –> based on the convergence of Quant (tireless Ken), Rauscher (Global strategy), Sluymer (Technicals)
– Biden vs Trump –> based on correlation to either candidate odds
Granny Shots:
Full stock list here –> Click here
Trifecta Epicenter:
Full stock list here –> Click here
Biden White House vs. Trump White House:
Full stock list here –> Click here
POINT 1: Daily cases 156,308, +26,710 vs 7D ago — the lowest 7D delta in two weeks
The latest COVID-19 daily cases came in at 156,308, up +26,710 vs 7D ago. Wave 3 is gaining momentum, so we are not really near a peak in daily cases but the 7D delta seems to be slowing.
– the spread of cases across the US is widening
– the fastest spread remains in the wave 3 states, in particular, WI, IL, ID, ND, SD, UT, or WIINSU.
– but other states are seeing higher cases and dominating top 10 are essentially all previously “unscathed” states
– we all should be cognizant that cooler weather is making spread faster, perhaps due to weaker immune systems or “indoor” time
Source: COVID-19 Tracking Project and Fundstrat
7D delta at 26,710 is the lowest in two weeks, which means we could be at 200,000 cases in two weeks
Again, the daily change vs 7D ago, in our view, is the leading indicator as it is what influences the 7D moving average.
– Daily cases are rising vs 7D ago,
– It had been rising at >40,000 7D delta
– But the pace slowed to 26,710 on Tuesday
At this pace, we could see daily cases rise to >200,000 within two weeks. So wave 3 is clearly gaining momentum.
Source: COVID-19 Tracking and Fundstrat
We have been looking at different ways to give the best context to Wave 3. Up until now, Wave 3 for COVID-19 differs from Wave 1 and wave 2 for several reasons:
– it is spreading across states previously unscathed in wave 1 and wave 2
– it is more geographically disperse but mostly in the Mountains region
– 6 states are seeing the fastest spread, WI, IL, ID, ND, SD, UT, or WIINSU
– Unlike Wave 1 and wave 2, states caught up in wave 3 are largely laissez-faire, without any policy intervention
New:
– Daily cases per 1mm for wave 1 (NY tristate) and wave 2 (F-CAT) are identical for the first time
Source: COVID-19 Tracking and Fundstrat
Source: COVID-19 Tracking and Fundstrat
POINT 2: Is El Paso rolling over? If so, first signs of Wave 3 peaking…
As we move through wave 3, we are seeing a surge in cases across the US, including states that were engulfed in wave 1 and wave 2. Texas is standing out, because it was hard hit in Wave 2 but it looks to be set to make a new high in daily cases (see chart below):
– Texas, therefore, is one of the few states that are set to do worse in Wave 3 than in the previous wave.
Source: COVID-19 Tracking Project
Based upon the 6 largest counties, 3 of them are at new highs…
Below are the 6 largest counties in Texas and their associated daily cases per 1mm resident (7D avg). As you can see, 3 of the 6 are still well below the prior peak.
– In fact, San Antonio has hardly seen an increase
– But El Paso has exploded.
Source: COVID-19 Tracking Project
The situation is so serious in Texas that it has prompted the state to employ inmates to work at the morgue. This is reminiscent of the darkest days in NYC. There are several potential reasons El Paso is particularly hard hit. Several media stories have pointed to the labor force in El Paso is largely blue collar, thus, cannot work from home.
https://www.texastribune.org/2020/11/15/coronavirus-texas-el-paso-inmates-morgue-deaths/
El Paso cases seem to be rolling over…
The good news is that daily cases in El Paso are beginning to roll over. Thus, we are seeing the first signs that Wave 3 could be peaking. This would be a good development, if true:
– We are still early in the flu season (ending around Feb), so we have been expecting cases to peak around then
– But if El Paso is a template, we could see a Wave 3 peak earlier
Time will tell.
POINT 3: Dog owners (pet) have 78% greater risk of catching COVID-19…
Researchers at the University of Granada and Andalusian School of Public Health in Spain have published a new study looking at the risk of catching COVID-19 under different activities. The key takeaways are as follow:
– Dog owners were 78% more likely to be infected
– Taking home delivery of groceries increase risk by 94%
– Working at the office raises the risk by 78%
– Living with an infected raises risk by 60X, or 6,000%
https://www.dailymail.co.uk/news/article-8954431/Do-dogs-spread-coronavirus-Spanish-study-finds-owners-78-higher-risk-catching-it.html
So the most obvious and the greatest risk of getting infected is by living with someone infected. But the risk to pet owners struck me as very curious, and is also the headline of the article in the DailyMail UK. Researchers noted that they are not entirely sure why animal owners face greater risk. It could be due to:
– animals spreading it
– other people touching dogs and spreading it
– etc.
But their takeaway is that owners need to take extra precautions against infection, because of this heightened risk.
https://www.dailymail.co.uk/news/article-8954431/Do-dogs-spread-coronavirus-Spanish-study-finds-owners-78-higher-risk-catching-it.html
The study involved 2,086 participants, but <5% of the participants caught COVID-19 at some point. So this means, only 94 of the 2,086 respondents were infected. It is not necessarily the largest sample set.
