Click HERE to access the FSInsight COVID-19 Daily Chartbook.
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Our 2021 Year Ahead Outlook will be released Thursday, December 17th at 3:00 PM EST
Joining us for a webinar, which will include the Fundstrat Macro Team. The following topics will be discussed:
• Overall macro and strategy outlook 2021
• Economic outlook, what can we reasonably expect for GDP growth?
• Where are we in this investment cycle and what themes will dominate?
• We discuss key policy risks and upsides
• New investment themes
• Full EPS and sector outlook
Don’t miss it!!!!
You must register in advance.
Register here to attend –> REGISTRATION LINK
Should you have any questions, please do not hesitate to contact us at (212) 293-7140 or email inquiry@fsinsight.com.
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STRATEGY: Vaccine headlines are not always going to be positive… but doesn’t mean there isn’t progress
Vaccines are coming. But in the next 6-9 months, there will be multiples more demand than supply of effective/safe vaccines. So the ‘cancel’ culture mob is going to be scrutinizing every policymaker regarding vaccine access. We saw this a few weeks ago with criticism of Cuomo and his vaccine actions. And now there is another story regarding the current US administration and the Pfizer vaccine purchase commitments. Per the NY Times, the White House declined to buy more than 100 million doses (50 million recipients) and now with massive orders from outside the US, Pfizer cannot supply with US with sufficient quantities until after June 2021. Alternatively, the US will need to acquire vaccines from other providers.
https://www.nytimes.com/live/2020/12/07/world/covid-19-coronavirus
The future is uncertain. And intuitively, I would rather see the US have more doses of a vaccine, than less. But keep in mind, the Pfizer vaccine is the one that requires the most difficult supply chain. So it could ultimately be a good thing the US is only buying 100 million doses. I guess my point is, let’s not jump to hasty conclusions.
Wave 3 is continuing for COVID-19 and we are seeing a surge pretty everywhere in the US now. And it is triggering various policymakers in each state to pursue some restrictive measures. But these are not entirely surprising either — after all, many medical experts were warning us the carnage that would happen in Winter and the recent wave in cases. And we already witnessed this in Europe. But as we discuss below, financial markets seem to be taking this in stride.
– USD is weaker (it would be stronger if lockdowns caused economic contraction)
– credit is rallying, particularly HY
– VIX is behaving
So for now, we think the appropriate stance remains to be risk-on, despite this massive rise in cases.
In the midst of Wave 3, more areas are seeing a slowing of cases. Below are among the 6 states hardest hit during the earliest part of Wave 3, WI, IL, ID, ND, SD and UT, or WIINSU, and as you can see below, 4 of the 6 states are seeing a clear sign of cases rolling over. These are from very high levels of daily cases (per 1mm), so none are really seeing COVID-19 vanquished. But it is a good sign, nonetheless, that cases are slowing in some states/counties.
Source: Johns Hopkins and Fundstrat
As for financial markets, I find it very curious to see the sustained decline in the USD (DXY as a proxy). The USD has fallen steadily since March, and this downturn has strengthened in November. The following things, if they were ‘risk-off’ signals, should have caused USD strength:
– COVID-19 surging throughout USA (=recession risk=strong USD)
– weak economic data, including Jobs miss and ISM miss (=recession risk=strong USD)
– Presidential transition risk (chaos=strong USD)
– Vaccine supply issues (=recession risk=strong USD)
So these things, if raising the risk of an economic relapse, should be causing USD strength. Instead, we see a steady decline in USD.
Source: Bloomberg
I am puzzled, so I asked Rob Sluymer, our Head of Technical Strategy, about this persistent USD weakness. In his view, USD is going to be weak for the next 3-4 years, possibly. That is what he means by ‘current cycle.’
– Rob’s view, USD should continue to be weak, with short-term countertrend bounces
As long as USD is weakening, this further fuels equity upside. This is not that different from the USD story in 2017 through mid-2018, or 18 months. During that time, S&P 500 posted a strong 2017 and was strong into 3Q18 (up ~8%).
– But once USD started to strengthen (along with Fed tightening) = 4Q2018 was a train wreck
– Moral of story –> watch USD
Source: Bloomberg
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
Tickers: AAPL, AMZN, AXP, BF.B, CSCO, EBAY, GOOG, GRMN, GWW, INTC, KLAC, LEN, LOW, MNST, MSFT, MXIM, NVDA, OMC, PM, PYPL, QCOM, TSLA, XLNX
Trifecta Epicenter (*):
Full stock list here –> Click here
Tickers: ACM, AGCO, AN, ASB, BBY, BHF, BK, BOH, BWA, CF, CFX, CPT, CRI, CSL, DAL, DOV, DRI, EMR, EOG, F, FITB, FL, FLS, FNB, GE, GM, GPC, GPS, GRMN, HAS, HFC, HIW, HLT, HOG, HP, IBKR, IEX, JBHT, JBLU, KIM, LB, LEG, LUV, LYB, MAR, MGM, MIDD, MLM, MMM, MOS, MPC, MTG, NCLH, NEU, NNN, NOV, NUE, NVT, NWL, NYCB, OC, PB, PBCT, PHM, PII, PNFP, PNR, PSX, PXD, RCL, RS, SBNY, SBUX, SIX, SLB, SNA, SON, STL, STOR, SYF, TOL, TPX, UBER, UNP, VFC, VNO, WAB, WBS, WH, WTFC, WYND, XYL
Biden White House vs. Trump White House:
Full stock list here –> Click here
(*) 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.
POINT 1: Daily cases 178,228, +30,826 vs 7D ago. Northeast getting bad.
The latest COVID-19 daily cases came in at 178,228, up +30,826 vs 7D ago.
– the massive 7D jump is due to the fact that last week was Thanksgiving, so cases were suppressed (closures)
We won’t have a clearer picture of COVID-19 trends until after this “payback” period ends, which is a few weeks away. This is not that different than the distortions seen after Labor Day weekend.
Source: COVID-19 Tracking Project and Fundstrat
7D delta at +30,828…yikes
Again, the daily change vs 7D ago, in our view, is the leading indicator as it is what influences the 7D moving average.
– This is payback, as Thanksgiving is the 7D ago date…
Source: COVID-19 Tracking and Fundstrat
Cases are getting pretty bad in the Northeast. CT and PA both are among the top 6 states with the biggest jump in cases.
Source: COVID-19 Tracking and Fundstrat
Source: COVID-19 Tracking and Fundstrat
POINT 2: NY taking steps to make sure Wave 3 doesn’t cause the same carnage as Wave 1
Yesterday, we wrote about the drastic steps CA is taking to slow the massive surge in cases. CA had >30,000 cases on Sunday (normally a slow day), so the sheer scale of the outbreak is huge. And as shown below, NY state is really the only state of the Wave 1 states (NY, NJ, CT, MA, RI) that has not seen a new high in cases.
– NY state cases are surging, and while not quite matching the Wave 1 highs, they are nearly identical
– But hospitalizations, at the moment, are considerably lower
Source: COVID-19 Tracking and Fundstrat
The NY state cases and hospitalized (total) are shown below. And as you can see, NY cases are back to the prior highs (positivity rate is lower at ~5%). But the total number hospitalized at >4,000 is far lower than the 19,000 seen during the peak of Wave 1. So it is bad, but not wave 1 bad.
Source: COVID-19 Tracking and Fundstrat
NY Gov Cuomo announced new measures to mitigate the spread of COVID-19. Specifically, these measures are tied to hospital capacity in one of the 10 regions of the state.
– if the gov’t concludes a region will reach 90% of hospital capacity within 3 weeks, the region will be shutdown.
https://www.wsj.com/articles/new-york-enacts-new-covid-19-shutdown-metrics-11607369839
This includes shutting down activities except for essential services. And also limit indoor dining capacity in restaurants. As the article below notes, NYC itself is using 81% of available hospital bed capacity.
Source: WSJ
But NY is also taking other measures. As the NY Post reports, they are also sending out ‘mask squads’ whose job is to enforce the use of masks. The article points out that one area target is:
– Orange County and Rockland County
– Recall, during Wave 1, these were among the two hardest areas hit within NY state.
– In fact, these areas had a worse outbreak than NYC itself.
https://nypost.com/2020/12/07/ny-sends-mask-squad-to-enforce-covid-19-rules-in-lax-counties/
POINT 3: Nobel Prize winner proposes using the smartphone camera to speed COVID-19 testing results
A few days ago, a pre-print of a study was published in CELL proposing to use the camera on a smartphone to speed COVID-19 testing results. I saw this study because of a Reuters article published today, see below.
And while this might sound like a half-baked idea, the approach is proposed by scientists that include Jennifer Doudna, who was 2020’s co-winner of the Nobel Prize in chemistry. She describes using a CRISPR-based COVID-19 test and the greater photosensitivity of a smartphone (vs lab equipment) to more quickly deliver COVID-19 test results.
Source: Reuters
The link to the CELL article is below and this was published last Friday. As the summary below shows, they believe this new method could deliver results within 5 minutes.
https://reader.elsevier.com/reader/sd/pii/S0092867420316238?token=29317FE29C76297B1CE270E5DA0FAC2C5142D0E66E59E1F50EEE27590CDA51F06DD9EE0E914325DBB549F7DC36B46FD8
5 minutes is a massive improvement in test result time, nearly matching the speed of rapid testing. As the authors below note, PCR testing takes an average of 4.1 days and COVID-19 is most contagious within the first 1-5 days. So, 4.1 days means the disease would have largely passed its course, and the tested individual, unless they were quarantined, has been contributing to the spread.
– the authors note the sensitivity (false negatives) and specificity (false positives) errors should be better than antigen rapid tests (Roche, etc), using this approach crRNA based upon existing PCR primers.
– thus, this could be a breakthrough, if the approach is proven and is also accepted.
Source: CELL
Below is the schematic in the article. The tests involve using fluorescent signals. And smartphone cameras are able to better detect this light emission.
Source: CELL