VACATION ALERT!
Next week (3/15-3/19), Spring Break arrives for tireless Ken and for me.
– Daily COVID-19 updates will be sent, handled by the data science team
– But no strategy commentary, nor analysis.
– If there is breaking market moves, we will send out FLASH INTRADAY as needed
END OF VACATION ALERT!
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: S&P 500 “breakout” now implies 4,300 in 1H2021 before any “correction”
President Biden delivered his first prime-time White House address on Thursday. The two most prominent elements of this speech were:
– ensure vaccine availability for all US adults by May 1.
– return to normalcy by July 4th
Both are ambitious targets and if achieved, represent really important milestones. The benefits of making vaccines available for all adults are obvious. But a return to normalcy by July 4th is a big deal. It means the White House is going to focus on getting buy in from governors and mayors to achieve this target. Given the skepticism we find among investors regarding a reasonable chance to return to normalcy, if the White House aims for this, it is a positive surprise to consensus thinking.
Source: NY Times
Daily cases continue to show improvement, but the pace has slowed somewhat. As you can see below, the figures are still lower than a week ago, but at a slower pace. In the past week, there has been a pick up in cases in AZ, NJ, DE, MI and MA. But these rises, coupled with stubborn cases levels in FL and NY keep this from showing faster improvement.
Source: Fundstrat and state health departments
As for tracking “herd immunity” like levels, or states with ~60% vaccinated + infected, 25 states are at this level. This is up from 16 earlier in the week. But collectively, these 25 states represent about 27% of the US population. So while it is about half of the states, it is a smaller share of the population. But still, as the chart below highlights, the US is seeing steady forward progress and this figure continues to rise steadily.
Source: CDC and Fundstrat
STRATEGY: S&P 500 breaks to all-time high on Thursday, next stop, another +10% rise before next possible “correction”
The most significant market development this week, in our view, is the upside breakout of the S&P 500. Upside breakouts matter, representing a significant development in price levels for equities:
– upside breakout ends the “consolidation” since mid-Feb
– upside breakout taking place even as investors still fearful of “rate-mageddon”
– upside breakout taking place as VIX is crashing = double confirmation
Source: Fundstrat, Bloomberg
STRATEGY: Upside “breakouts” have been followed by 10% rally in S&P 500 = breakouts are a big deal
So you might wonder, well, it is only a modest “breakout” and what does it all mean? Take a look at the S&P 500 over the past year, and we marked some key points:
S&P 500 has seen 3 consolidations:
– June 6, 2020 to July 18, 2020
– Sept 2, 2020 to Nov 9, 2020
– Feb 16, 2021 to today (3/11)
Post-breakout:
– Post July 2020 breakout –> +11% rally
– Post Nov 2020 breakout –> +10% rally
– Post March 2021 breakout –> +10% rally? YES
As you can see, the base case is a +10% rally, following this breakout.
Source: Fundstrat, Bloomberg
Is there a fundamental underpinning to drive this upside breakout in equities? Yes, we think there will be fundamental surprise in the coming months:
– COVID-19 could be retreating faster = faster re-opening
– pent-up demand could be greater than expected
– operating leverage could be greater than expected
– investors have been largely risk-off, given rate fears
– interest rates could stabilize or even fall
So, there are multiple potential upside drivers for this +10%.
This week, equity leadership is “Epicenter” but Technology catches a bid = good
Epicenter stocks are leading equity gains in the past week, as shown below, with the exception of Utilities (which responded to rates).
– the leadership in the recent pullback was Epicenter, which rallied even as S&P 500 down 6%
– the leadership in the equity rally this week is Epicenter, outpacing the S&P 500 on the 5% rally
So, the market is validating the fundamental factors discussed above. The stock market “surprise” is coming from demand that helps Epicenter stocks. Thus, we think investors need to further increase their exposure to Epicenter. Recall, our Head of Global Portfolio Strategy, Brian Rauscher, upgraded his fundamental views on Energy and Financials in the past week.
– Technology finally rallied and this is a good thing
– Last Friday midday, we flagged to our clients that Technology was likely making its 1H2021 lows
– The rally this week seems to validate this view and its a big deal, since Technology is 30% of the S&P 500
Source: Fundstrat, Bloomberg
Bottom line: +10% move to S&P 500 4,300, but expect some wiggles over the next 10 days
So, the next major move, in our view, is a +10% rally in the S&P 500. It would not surprise if stocks needed to “catch their breath” — and that means flattish for the next 7-10 days.
– that is great for me, because both tireless Ken and I will be taking on vacation next week, for Spring Break.
STRATEGY: 25 “Power Epicenter Trifecta” stock ideas (*)
We are introducing a “Power Epicenter Trifecta” stock list. This is designed to identify the strongest stocks within our “Trifecta” epicenter stock list. We essentially added a “power” rating to the stocks in the trifecta list to find stocks with the strongest price appreciation potential. Thus, the criteria for the “Power Epicenter Trifecta” is:
Positive views (i) Quant (tireless Ken),
(ii) Global Portfolio Strategy (Brian Rauscher, aka Rocky) and
(iii) Technicals.
Plus strong “power” rating:
(i) trailing 1M return > 12M return
(ii) outperformed S&P 500 past 6M
(iii) price > 20D MAVG
(iv) price > 50D MAVG
Consumer Discretionary:
RL, NCLH, RCL
Financials:
PBCT, NYCB
Industrials:
NVT, DAL, KEX
Energy:
XOM, HP, NOV, SLB, COP, EOG, MRO, MUR, HFC, PSX
Real Estate:
BXP, HIW, UDR, KIM, WRI, VNO, JBGS
(*) the 25 “Power Epicenter Trifecta” stock ideas are the subset of the original 121 “Epicenter Trifecta” stock list. For the full list of our original “Epicenter Trifecta” stock list, please click the link below. 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.
For the full list of the 121 “Epicenter Trifecta” stock ideas, please Click Here.
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, TNL, 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 55,599, -2,659 vs 7D ago…
_____________________________
Current Trends — COVID-19 cases:
– Daily cases 55,599 vs 58,258 7D ago, down -2,659
– 7D positivity rate 4.5% vs 4.8% 7D ago
– Hospitalized patients 36,369 down -18% vs 7D ago
– Daily deaths 1,243, down -29% vs 7D ago
_____________________________
– The latest COVID-19 daily cases came in at 55,599, down -2,659 vs 7D ago.
– The 7D delta in daily cases has been around -2,000 to -5,000 in the past few days, and if this speed of decline persists, US COVID-19 cases are on the track for sub-30,000 by late-March.
Source: Fundstrat and state health departments
7D delta in daily cases turns negative for 14 consecutive days and accelerates to the downside…
After being positive for three days last week, the 7D delta in daily cases has turned negative again. This is good news – it shows the rise in daily cases could just be the results of the distortion of test/case data due to the cold snap, and the daily cases in the US are still falling.
Source: Fundstrat and state health departments
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 has fallen significantly from the wave 3 peak.
Source: Fundstrat and state health departments
Source: Fundstrat and state health departments
Source: Fundstrat and state health departments
Source: Fundstrat and state health departments
POINT 2: VACCINE: 25 states (+5 from Tuesday) near ~60% infected + vaccinated and 10% of Americans are now fully vaccinated
_____________________________
Current Trends — Vaccinations:
Vaccinations ramping steadily
– avg 2.2 million this past week vs 2.0 million last week
– overall, 10.1% fully vaccinated, 19.1% 1-dose+ received
_____________________________
Vaccination frontier update –> 25 states now near or above 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, 25 states (see below) are basically all at this level
– So slowly, the US is getting to that threshold of presumable herd immunity
Source: CDC and Fundstrat
Collectively, these 25 states represent about 27% of the US population. So while it is about half of the states, it is a smaller share of the population. But still, as the chart below highlights, the US is seeing steady forward progress and this figure continues to rise steadily.
Source: CDC and Fundstrat
There was a total of 2,474,745 doses administered, up 46% from 1,691,492 doses 7D ago. The pace overall is steadily rising, as evidenced by the 7D moving average (see blue line).
Source: CDC and Fundstrat
~30% of the US has seen 1-dose penetration >20%… 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 at least 5%/10%/15% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, all US states have seen 5% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 10% and 15% of its residents fully vaccinated, this figures are only 52.5% and 0.9%, respectively.
– While all US states have seen vaccine penetration >10%, 95.6% of them have seen 1 dose penetration >15% and 30% of them have seen 1 dose penetration > 20%.
– All of the US has at least 5% of its residents fully vaccinated, However, only 37% of US has fully vaccinated >10%
– This is still a small figure (5%/10% of residents fully vaccinated) but this figure is rising sharply now,. This figure could rise even more rapidly after the JNJ’s 1-dose vaccines roll out.
– the takeaway is the vaccination efforts are unlikely to be having much of an effect on case figures, currently.
Source: CDC 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 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 ~40 for the past few days
– this means 40 vaccines dosed for every 1 confirmed case
This figure is rising nicely and likely surges in the coming weeks
Source: CD and Fundstrat
In total, about 64 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:Tracking “un-restricted” and “restriction-lifted” states
We are changing Point #3 to focus primarily on tracking the lifting of restrictions, as states begin to ease various mandates. Keep in mind, easing/lifting restrictions can take multiple forms:
– easing indoor capacity
– opening theaters, gyms, salons, saloons
– eliminating capacity restrictions
– eliminating mask mandates
So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below.
– states that eased in 2020: AK, OK, MO, FL, TN
– states that eased start 2021 to now: SD, ND, NB, ID, MT, IA, NC, MS, SC, AZ, TX, MD
– states that announced future easing dates: GA, NY, WI, AR, CA, AL, CT
GROUP 1: States that eased restrictions in 2020…
The daily case trends in these states is impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases. Rather, the case trends in these states look like other states.
GROUP 2: States that eased restrictions in 2021 to now…
Similar to the list of states above, the daily case trends in these states is impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases.
– we have previously written about how ND and SD, in particular, have seen an utter obliteration of COVID-19 cases in those states
– that seems to be a function of vaccine penetration + infection penetration, leading to something akin to “herd immunity”
GROUP 3: States that announced plans ease restrictions in 2021…
These states have upcoming dates to ease restrictions. The dates are indicated on each chart. The cases trends in these states have been mostly positive, with perhaps the exception of NY state:
– NY state case levels seem awfully stubborn at these high levels
– weather is improving in NY area, so if weather has any effect on virus transmission, it should slow cases
