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: Scared money makes money when there is a vaccine
The NY Times published a story yesterday, noting correctly, the US passed on opportunities to acquire more than 100 million doses of the Pfizer vaccine (enough for 50 million) but implying that this would lead to a shortage of vaccines in the US. Whether this is factually correct or not, the problem I have with this reporting, is that it ‘alarmist’ and paints a hopeless picture for the US.
More importantly, as Duke University analysis, Quartz.com has reported, shows the US and the EU are one of a few regions that have already pre-ordered sufficient quantities of vaccines to cover the entire population. In other words, the NY Times story only told half the story.
https://qz.com/1937072/the-countries-that-have-already-ordered-enough-covid-19-vaccines/amp/
As shown below, the US has pre-ordered 700 million doses of 3 known vaccines, and this does not reflect others in development. Thus, while there are only 100 million PFE doses ordered, Americans will have access to others.
– fortunately, the US will not be forced to acquire less-tested vaccines, nor require some Executive order to secure a supply
– in other words, there is a reason financial markets largely shrugged off that story.
– it is largely a half-truth
https://qz.com/1937072/the-countries-that-have-already-ordered-enough-covid-19-vaccines/amp/
But the vaccine anxiety highlights that financial markets are more focused on a vaccine than the economy…
I am stating something obvious, but less obvious than you might realize. The equity markets are not the US economy. This is true on two levels:
– composition of US equity indices is not reflective of US economy
– holders of US equities are not the same stakeholders as those who drive the US economy
It is the latter point, we believe, that is often overlooked by investors. And in the pandemic world, this is a huge difference.
The stakeholders/ drivers of the US economy are Americans under age 40…
The US economy is largely driven by younger Americans. We have written many research reports on this subject and there is a multitude of evidence, but the two most obvious are:
– Adults age 30-50 are the prime workforce
– Adults age 30-45 are the primary drivers of credit card spending growth
– Adults age 30-50 are the primary consumers of consumer credit
In other words, the US economy is driven by a narrow 20-year band of adults, age 30-50.
COVID-19 mortality risk for these stakeholders is low…
And as the chart below shows, the CFR, or case fatality rate for these cohorts is low, essentially 0%.
– Whereas, the CFA is quite high for Americans over age 60.
Source: CDC
70% of financial market wealth is controlled by Americans >age 60…
The financial market stakeholders are quite the opposite. Using data from the Federal Reserve’s Survey of Consumer Finance, we see that 70% of the $100 trillion of US household wealth (yup 5X GDP) is controlled by Americans >age 60.
– Millennials only control 5%
Source: Federal Reserve
Financial markets in 2020 have been controlled by ‘scared money’
Is it any wonder, therefore, why financial markets have been skeptical of the rise in stocks in 2020? The holders of US wealth, adults >age 60, have been very worried about the health risks from COVID-19. While the US economy stakeholders have bristled under lockdowns.
– a vaccine, therefore, is a massive catalyst for ‘scared money’ because it will end the fear for COVID-19
In other words, a vaccine is a big deal. Hence, we see stocks have substantial upside into YE.
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 195,688, +21,238 vs 7D ago. CA case figures still mind boggling
The latest COVID-19 daily cases came in at 195,688, up +21,238 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 +21,238…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. NY 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: Michigan extends ‘pause’ through December 20… it seems to be working
MI Gov Gretchen Whitmer extended the ‘pause’ through December 20th. This pause includes halting indoor dining and in-school instruction at high schools. And is a stricter form of a soft lockdown.
– part of the rationale for extending the pause is to account for the renewed potential spread from Thanksgiving
– and December 20th is 4 weeks, basically, from that date
https://www.detroitnews.com/story/news/politics/2020/12/07/whitmer-administration-covid-pause-to-continue-december-20-pandemic/3858317001/
Looking at daily cases for Michigan below, we can see this pause seems to have some impact. Daily cases soared to >17,000 on 11/27/2020 and have fallen by half to ~9,000. In other words, by sharply slowing down the mobility of the state’s residents, it has reduced the spread.
Source: COVID-19 Tracking and Fundstrat
POINT 3: There will likely be a whole lot of vaccines in 2021…
To further the discussion about vaccine availability, or rather the sufficiency of vaccines, Bill Gates, Microsoft co-founder, spoke about vaccines at the virtual Singapore Fintech Festival.
https://nationalinterest.org/blog/coronavirus/bill-gates-six-coronavirus-vaccines-could-be-green-lighted-spring-174091
He noted he expects 6 vaccines to be approved by 1Q2021. As we noted above, the US has already ordered 700 million doses from 3 known vaccine candidates.
And if Bill’s comments are correct, there will be plenty of vaccines to go around. But if you are wondering which nations have ordered sufficient quantities, you can see the US has >100% coverage.
– other nations with >100% coverage are Canada, Japan and the UK
