Click HERE to access the FSInsight COVID-19 Daily Chartbook.
We are shifting to a 4-day a week publication schedule:
- Monday
- Tuesday
- Wednesday
- SKIP THURSDAY
- Friday
STRATEGY: Washington focus this week — COVID relief + hearings on retail investors
Are markets underestimating the impact of this cold snap rolling across the US?
For those of us in the Midwest or in the Northeast, this frigid cold snap rolling across the US strikes most as nothing out of the ordinary. But 2020 and 2021 are hardly normal conditions.
Source: Washington Post
In fact, take a look at some of the headlines from the Washington Post.
– it is so cold in TX, weather satellites are confused
– Nissan and Toyota halt production
– it is colder in Kansas than in Alaska
– Houston utilities note power out for several days — when was the last time this happened?
In other words, millions of Americans are facing more suffering, needlessly. This time, from Mother Nature. But we need to be mindful of this.
Source: Washington Post
The cold snap is so bad, 40% of Texas thermal capacity has been knocked out — 3X worse than ERCOT “extreme worst case”
There is a great thread by Jesse Jenkins, Princeton Professor, explaining how bad the power outage is in TX area.
– >31,000 MW (megawatts) of capacity out
– 40% of the state’s thermal capacity
– ERCOT (reg agency) viewed 13,000 as “extreme worst case”
The current outage is 3X worse than “extreme worst case”
Source: twitter.com
Source: twitter.com
Could cold snap distort COVID-19 data?
So this cold snap is pretty intense. It is also going to impact the COVID-19 numbers. How? Well, as one of our clients was quick to point out. So here are some distortions from the cold snap:
– cold snap means people stay home, thus, fewer people seeking tests
**fake “good news”
– cold snap means people stay home, thus, not spreading COVID-19, R0 actually falls
**real “good news”
So, in a way, we think there are two effects interplaying with COVID-19. One might make progress look “fake good.” But the other might be actually really good.
Washington Reddit/Retail hearings this week and set to pass COVID-19 relief…
Washington will be in focus later this week for two reasons. First, on Thursday (2/18), the House Financial Services Committee will hold a hearing on Reddit traders/Retail. Second, Washington, post-impeachment, will focus on passing COVID-19 relief.
In our view, both events will be a positive for markets. Yes, even the hearings on “Reddit traders” — why? The hearings will be quite a lot of public grand standing by policymakers, perhaps even accusations levied against both hedge funds and against Reddit forum users. But as our very experienced Policy Strategist, Tom Block, notes, House members could get “lost in the questions.”
– If so, I would doubt a consensus will emerge on a solution
– Hence, besides some blustering, the odds of new legislation/rules seem low
No action by Washington = good for stocks (we avoid unintended consequences)
Source: Tom Block of Fundstrat
If you are interested in the hearing, this is the weblink.
Source: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=407107
Similarly, on COVID-19 relief, this is a critically needed package given the millions of Americans out of work. Moreover, many portions of the US economy are in shambles. Hence, passing this deal is key. It looks like this will be coming out of the Budget Reconciliation process, per Tom Block. This makes this easier to pass, as it is filibuster-proof.
– however, this gives each Democratic Senator “veto power” per Tom Block, and thus, the potential for more “pork” to be added
Is more “pork” bad for markets? It likely means more money allocated for relief = good for markets, near term.
Source: Tom Block of Fundstrat
So you can see, Washington events in this coming week are probably a tailwind for equities. But I want to remind myself, the future is uncertain. And COVID-19 disease is extremely unpredictable.
STRATEGY: Epicenter Trifecta List 121 stocks
The case for being Cyclically-tilted is strengthening:
– Vaccine rollout set to accelerate
– US cases collapsing
– US economy set to re-open
– US corporates reset cost structures = strong operating leverage
– US credit markets strong = cost of capital falling
Below is our updated “Trifecta” epicenter stock list. These are the stocks which were hit the hardest by the pandemic and have the greatest operating leverage to a re-opening. And we like the earnings upside in these stocks, because of the massive cost reset. The stocks are based on positive views coming from the trifecta of: (i) Quant (tireless Ken), (ii) Global Portfolio Strategy (Brian Rauscher, aka Rocky) and (iii) Technicals.
Consumer Discretionary:
AN, GM, F, GRMN, LEG, TPX, TOL, NWL, MAT, PII, RL, MGM, HLT, MAR, NCLH, RCL, WH, WYND, SIX, DRI, SBUX, FL, GPS, KSS, LB, VFC
Financials:
FITB, WTFC, ASB, BOH, FHN, FNB, PB, PBCT, RF, STL, TFC, WBS, PNFP, PACW, SBNY, NYCB, MTG, EVR, GS, IBKR, VIRT, BK, STT, SYF, BHF
Industrials:
AGCO, OC, ACM, WAB, EMR, GNRC, NVT, CSL, GE, IEX, PNR, CFX, DOV, MIDD, SNA, XYL, FLS, EAF, TTC, ITT, ALK, DAL, JBLU, LUV, MIC, KEX, UNP, JBHT, R, UBER, UHAL, LSTR, MAN
Energy:
XOM, HP, BKR, HAL, NOV, SLB, COP, EOG, FANG, HES, MRO, MUR, PXD, XEC, HFC, MPC, PSX
Basic Materials:
LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON, IP
Real Estate:
BXP, HIW, UDR, KIM, NNN, WRI, VNO, JBGS, RYN
Source: Fundstrat, Bloomberg
(*) 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.
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), Technicals
– Violence in USA –> companies that are involved in some aspect of home or personal security. We are not “recommending” these stocks, but rather, bringing these stocks to your attention.
Granny Shots:
Full stock list here –> Click here
Tickers: AAPL, CSCO, INTC, MXIM, NVDA, EBAY, KLAC, GRMN, GOOG, MNST, MSFT, AMZN, QCOM, TSLA, PYPL, AXP, BF/B, PM, XLNX, TGT, PG, XOM, VLO, GL, RF, ATVI, BBY, GE, AMAT, LRCX, MU, HPQ
Trifecta Epicenter (*):
Full stock list here –> Click here
Tickers: AN, GM, F, GRMN, LEG, TPX, TOL, NWL, MAT, PII, RL, MGM, HLT, MAR, NCLH, RCL, WH, WYND, SIX, DRI, SBUX, FL, GPS, KSS, LB, VFC, FITB, WTFC, ASB, BOH, FHN, FNB, PB, PBCT, RF, STL, TFC, WBS, PNFP, PACW, SBNY, NYCB, MTG, EVR, GS, IBKR, VIRT, BK, STT, SYF, BHF, AGCO, OC, ACM, WAB, EMR, GNRC, NVT, CSL, GE, IEX, PNR, CFX, DOV, MIDD, SNA, XYL, FLS, EAF, TTC, ITT, ALK, DAL, JBLU, LUV, MIC, KEX, UNP, JBHT, R, UBER, UHAL, LSTR, MAN, XOM, HP, BKR, HAL, NOV, SLB, COP, EOG, FANG, HES, MRO, MUR, PXD, XEC, HFC, MPC, PSX, LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON, IP, BXP, HIW, UDR, KIM, NNN, WRI, VNO, JBGS, RYN
Violence in USA:
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 COVID-19 cases 55,891, -29,074 vs 7D ago… tracking sub-50,000 this week
_____________________________
Current Trends — COVID-19 cases:
– Daily cases 55,891 vs 84,965 7D ago, down -29,074
– 7D positivity rate 6.7% vs 8.2% 7D ago
– Hospitalized patients 64,533, down -19% vs 7D ago
– Daily deaths 2,202, down -21% vs 7D ago
_____________________________
The latest COVID-19 daily cases came in at 55,891, down -29,074 vs 7D ago.
– US cases could fall 50,000 this week and set to fall further
– COVID-19 cases have declined (vs 7D ago) for 36 consecutive days
Source: COVID-19 Tracking Project and Fundstrat
Daily cases are falling by ~25,000 vs 7D ago (7D delta, see below)… Wow
The 7D delta has turned negative for the past 36 days consecutively. This is impressive and the rate of change is accelerating to the downside.
– this is contributing to the sense that this receding of cases is a much faster retreat than seen in the past few months
Source: COVID-19 Tracking and Fundstrat
US hospitalization still rolling over … and even US deaths seem to be rolling over…
Below we show the aggregate patients who are currently hospitalized due to COVID. It certainly seems to be rolling over = good sign.
Source: COVID Tracking Project and Fundstrat
Source: COVID Tracking Project and Fundstrat
Source: COVID-19 Tracking and Fundstrat
Source: COVID-19 Tracking and Fundstrat
POINT 2: VACCINE: In US, only ND + SD still have >60% infected + vaccinated
_____________________________
Current Trends — Vaccinations:
Vaccinations ramping steadily
– avg 1.6 million this past week vs 1.4 million last week
– overall, 4.3% have 2-doses, 11.3% 1-dose
_____________________________
Vaccination frontier update –> only ND + SD > 60% combined penetration (vaccines + infections)
Below we sorted the states by the combined penetration (vaccinations + infections). As we commented in the past, the key figure is the combined value >60%, which is presumably near herd immunity. That is, the combined value of infections + vaccinations as % population > 60%.
– Currently, only ND + SD are at this level
– many states are approaching this such as UT, RI, AZ, TN, OK, NE, IN, WI at >50%
– So slowly, the US is getting to that threshold of presumable herd immunity
Source: CDC, COVID Tracking Project and Fundstrat
CDC did not update its vaccination tracker on Monday due to President’s Day, Therefore, Tuesday’s data represent the vaccination progress over the past two days. A total of 2,232,313 doses were administered on Monday and Tuesday, up from 1,914,547 (1,147,250 + 767,287) a week ago. The pace overall is steadily rising, as evidenced by the 7D moving average (see blue line).
Source: CDC, COVID-19 Tracking Project and Fundstrat
About 90% of the US has seen 1-dose penetration >10%… still not wide geography
To better illustrate the actual footprint of the US vaccination effort, we have a time series showing the percent of the US with 2-doses covering at least 5% of its residents, displayed as the orange line on the chart. This figure is 17.3% (orange line). That means, while 4.3% of the US overall has received 2 doses, 17.3% of US states has US citizens with >5%.
– 91% of the US has seen vaccine penetration >10%. Not a lot of geography.
– Now 17% of the US has at least 5% of its residents with the full 2 doses
– This is still a small figure (5% of residents with 2 doses) but this figure is rising sharply now
– the takeaway is the vaccination efforts are unlikely to be having much of an effect on case figures, currently
Source: CDC, COVID-19 Tracking Project and Fundstrat
This is the state by state data below, showing information for states with one dose and for those with two doses.
Source: CDC, COVID-19 Tracking Project and Fundstrat
The ratio of vaccinations/ daily confirmed cases is generally trending higher (red line is 7D moving avg) and this is the most encouraging statistic.
– the 7D moving average is about ~15X for the past few days
– this means 15 vaccines dosed for every 1 confirmed case
This figure is rising nicely and likely surges in the coming weeks
Source: CDC, COVID-19 Tracking Project and Fundstrat
In total, about 38 million Americans have received at least 1 dose of a vaccine. This is a good pace and as we noted previously, implies 30% of the population by April.
Source: CDC and Fundstrat
POINT 3: 2021 Mardi Gras was indeed “tame” = 2021 setting up to be safer
Tuesday was Mardi Gras, the annual festival in New Orleans. This was originally a Christian holiday, the Tuesday (“Fat Tuesday”) before Ash Wednesday and carnaval/pagan holiday. The first US celebration of this holiday was in 1699 in New Orleans. Because it is the day before “Lent,” the festival was a day of revelry.
So you can see, Mardi Gras is a big deal for New Orleans and even for the US.
The festival this year is designed to be toned down, particularly as Louisiana saw a massive spike in cases following Mardi Gras. But given the freedoms of Americans, the natural concern is whether citizens would comply.
Source: USA Today
Looking at photos posted on twitter for Mardi Gras, it does seem like Americans followed these guidelines.
Source: twitter.com
This is a photo from 2020 and you can see the revelry in full force.
Source: twitter.com
And instead, there were much smaller groups and even social distancing and masks.
Source: twitter.com
Source: twitter.com
