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: UK Cases rolling over (surge lasted 45 days) = Epicenter stocks expected to rally this week
UK Cases are rolling over — Delta surge last 45 days
Perhaps the most important development over the past week is that UK COVID-19 cases are decisively rolling over.
– On June 3, UK cases starting to ~3,000 per day
– Due to the Delta variant
– UK pursued full re-opening, despite surge in cases
– On July 17, UK cases peak at 54,000 after rising parabolically
– This nearly matches prior record peak 67,000 in early Jan 2021
– Delta variant wave lasted 45 days
The last point is key. The UK saw a relentless parabolic surge in cases. This lasted 45 days. And even without any mitigation measures, the UK cases have been falling now for the past week.
…USA is 33 days into a surge –> 12 days before USA cases peak? Maybe
If the US follows the template of the UK, daily cases in USA might be peaking in the next 12 days:
– UK cases peaked 45 since start of surge
– USA is 33 days into surge
– as we wrote last week, stocks bottomed 34 days before Wave 2 cases peaked (June 2020)
– thus, we think stocks already bottomed
USA base case remains Delta is “more bark than bite”
Financial markets have been roiled by concerns that the Delta variant surge will trigger a rollback in US economic freedoms — not just USA, but around the world. In our multiple zooms/meetings/calls over the past week, the question of lockdowns has been brought up in every meeting.
But our base case remains that the Delta variant is more “bark than bite”:
– In India, where Delta first identified, ~80% of cases were asymptomatic
– mRNA vaccines (Pfizer/Moderna) still provide >88% protection against Delta hospitalization
– 69% of American adults vaccinated (60% fully)
– UK cases peaked after 45 days
– USA is 33 days into its current surge
So, I just don’t see the point in any policymakers rolling back economic re-openings, because the Delta variant. In fact, this would seem somewhat less logical given the most “at risk” Americans are those unvaccinated. And this is increasingly looking like a personal choice:
– if 80% of “unvaxxed” Delta cases are asymptomatic
– if vaccines still provide ~90% protection against hospitalizations
– In USA, 69% of working Americans are vaccinated
– thus, only 31% of adults are unvaxxed (low share)
We think policymakers will increasingly “blame shift” COVID-19 surges on the unvaccinated Americans. In fact, I don’t think this is purely just policymakers. It may be that businesses and even other nations will increasingly take on policies distinguishing between vaccinated and unvaccinated.
– Alabama Governor Ivey even said Friday “start blaming the unvaccinated folks”
– Alabama has among the lowest vaccination rates in the US
Source: https://www.cnn.com/2021/07/23/politics/alabama-governor-kay-ivey-unvaccinated-covid/index.html
And even the NFL is warning team owners that teams could forfeit games if COVID-19 outbreaks take place. This is a major shift in the reaction function of sports teams, governors, policymakers.
– in 2020, COVID-19 was the unforeseen enemy and measures take to “protect everyone”
– in 2021, COVID-19 spread is seen caused by “unvaccinated Americans”
Source: https://www.cnbc.com/2021/07/22/nfl-warns-teams-could-forfeit-games-if-covid-outbreaks-occur-among-unvaccinated-players.html__source=iosappshare%7Ccom.slack.slackmdm.share
Even Dr. Fauci is not talking about rolling back economic re-opening, but “course correcting” on masks
With Delta surging throughout the US, and with the growing possibility that COVID-19 is seasonal, we naturally expect policymakers to “course correct”
– course correct = keep economy open, but adjust
– Dr. Fauci on Sunday suggested indoor mask mandates might return
While the idea of masks remain unpopular, particularly among COVID-19 skeptics, it surely seems to have stopped the flu season entirely.
Source: https://www.bostonherald.com/2021/07/25/fauci-new-mask-guidelines-for-fully-vaccinated-people-under-active-consideration-as-coronavirus-cases-surge/
STRATEGY: If UK cases are rolling over, we expect Epicenter stocks to start leading, starting this week
The rolling over of UK COVID-19 cases (as noted above) is a tactical signal for Epicenter stocks to begin outperforming:
– UK cases started to rise parabolically on 6/2/2021 (below)
– Energy stocks/Epicenter peaked on 6/3/2021 (+1 day lag)
– UK cases surged for 45 days peaking on 7/17/2021
– Epicenter stocks underperformed for 46 days, bottoming on 7/19/2021 (+2 day lag)
– UK took zero mitigation steps, and in fact, moved to a full reopening
– UK cases have been falling for 7 days now
Our takeaway?
– we think Energy/Epicenter stocks are going to start to rally beginning this week
– Energy/Epicenter got torched as investors fretted about Delta surge
– we don’t think USA cases need to plateau
– Investors will simply overlay UK vs USA and Israel vs USA
…Since UK Delta surge started, Technology and Healthcare led, while Epicenter crashed
Since Delta cases surged in UK, one can see the violent rotation below.
– in the 45 days since
– Technology/Healthcare led +7%/+3% vs S&P 500
– Epicenter torched
We think this will reverse imminently.
“July chop” likely ending as well…
We also think the case for a July chop is now ceasing. We think a stronger more generalized “risk on” will start soon:
– Markets got nervous about Delta surge, which started in UK/Israel
– Delta peaked in UK on 7/17/2021, 7 days ago
– UK policymakers took ZERO steps to mitigate
– USA policymakers taking ZERO steps to mitigate
– Stocks seemed to have tracked UK Delta surge closely
Moreover, as shown below, the breadth of the S&P 500 rally remains solid. The advance/decline line remains rising. And the spot VIX fell further last week, falling to 17.
– VIX barely managed a “low energy” surge to 25
…Epicenter stocks gave up huge gains in the past 45 days —> we see a fierce rally in 2H2021
In the past 45 days, Epicenter stocks saw huge declines. And now they are down vs pre-pandemic levels (vs S&P 500).
– why would Epicenter stocks be “worse” now vs December 2020?
– Visibility likely to improve in next few weeks with Delta likely rolling in USA within 12 days
– Fed still dovish
– Infrastructure spending coming
– July chop is over
Thus, we see a strong rally in Epicenter stocks in 2H2021.
POINT 1: Daily COVID-19 cases 11,912, up +4,290 (ex-FL&NE) vs 7D ago… 7D delta (the speed of case rise) has been slowly rising over the past week…
_____________________________
Current Trends — COVID-19 cases:
– Daily cases 11,912 vs 15,632 7D ago, down -3,720
– Daily cases ex-FL&NE 11,912 vs 7,622 7D ago, up +4,290
– 7D positivity rate 5.6% vs 4.7% 7D ago
– Hospitalized patients 31,662, up +41% vs 7D ago
– Daily deaths 265, up +1.2% vs 7D ago
_____________________________
*** Florida and Nebraska stopped publishing daily COVID stats updates on 6/4 and 6/30, respectively. We switched to use CDC surveillance data as the substitute. However, since CDC surveillance data is subject to a one-to-two day lag, we added a “US ex-FL&NE” in our daily cases and 7D delta sections in order to demonstrate a more comparable COVID development.
On Sunday, 14 states and Puerto Rico reported a total of 11, 912 new cases. All 14 states and PR reported higher daily cases than 7D ago. Regarding the 7D delta in daily cases (the speed of case rise), it has been gradually rising over the past week and now is at ~14,000. As we noted above, if US follows the same pattern as UK, US could be peaking in about two weeks (12 days). Hence, based on current speed of case rise, US cases could reach 100,000 before starting to roll over.
7D delta in daily cases has been slowly rising, now at ~14,000…
The 7D delta in daily cases has been slowly rising over the past week. A rising 7D delta means the speed of the case rise is increasing. But given the “slow“ speed, the rise is not parabolic yet (as lease so far). However, the future is uncertain, so that it could rise rapidly. We will be closely watching this metric.
Low vaccinated states seem to have a larger increase in daily cases compared to their recent low…
Below, we added a new section called “Parabolic Case Surge Tracker” to monitor the possible parabolic surge in daily case figures. In the table, we included both the vaccine penetration and the recent case trend for 50 US states + DC. The table is sorted by the multiple of their current daily cases divided by their recent low in daily cases.
– The states with higher ranks are the states that have seen a more significant rise in daily cases
– We also calculated the number of days between now and the recent low date; a state with a high multiple but low number of days since its low means the state is facing a relatively rapid surge in daily cases
– The US as a whole, UK, and Israel are also shown at the top as a reference
Current hospitalization and positivity rates are rising… Daily deaths remain flat…
Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID. As you can see, hospitalization and daily deaths are relatively low compared to the prior waves. However, with the recent increase in daily cases, current hospitalization is clearly turning upwards. Regarding positivity rate, it recently exceeded 5%, which is higher than the positivity rate we observed during the “mini” wave this April and significantly higher than the recent low of <2%. Daily deaths seem to be still flat, but it could reverse if case figures continue to rise.
POINT 2: VACCINE: vaccination pace has been slightly rising over the past few days… The effort to get more people fully vaccinated remains the key…
_____________________________
Current Trends — Vaccinations:
– avg 0.6 million this past week vs 0.5 million last week
– overall, 48.8% fully vaccinated, 56.3% 1-dose+ received
_____________________________
Vaccination frontier update –> all states now near or above 80% combined penetration (vaccines + infections)
Below we sorted the states by the combined penetration (vaccinations + infections). The assumption is that a state with higher combined penetration is likely to be closer to herd immunity, and therefore, less likely to see a parabolic surge in daily cases and deaths. Please note that this “combined penetration” metric can be over 100%, as infected people could also be vaccinated (actually recommended by CDC).
– Currently, all states are near or above 80% combined penetration
– RI, MA, SD, CT, NJ, IL, NY, DE, NM, UT, PA, ND, AZ, MN, CA, FL are now above 100% combined penetration (vaccines + infections). Again, this metric can be over 100%, as infected people could also be vaccinated. But 100% combined penetration does not mean that the entire population within each state is either infected or vaccinated.
Below is a diffusion chart that shows the % of US states (based on state population) that have reached the combined penetration >60%/70%/80%/90%. As you can see, all states have reached 60% and 70% combined vaccination + infection. 96.8% of US states (based on state population) have seen combined infection & vaccination >80% and 65.6% of US states have seen combined infection & vaccination >90%.
There were a total of 773,145 doses administered reported on Sunday. Over the past 7 days, 582,755 doses were administered per day on average, up 15% from 7D ago. Over the past 2 weeks, the vaccination pace has been mostly flat, but appears to be slightly rising. It has similarly risen slightly compared to 7D ago and somewhat sharply over the past 4-5 days. Perhaps people are becoming more inclined to get vaccinated over growing delta variant concerns? We’ll continue to monitor this trend.
Admittedly, nearly 2/3 of the US population eligible (age 12+) to receive COVID vaccines have already received at least one dose. For some people among the remaining 1/3, vaccine hesitancy concerns might not easily be reversed. But in order to prevent another parabolic surge in daily cases, hospitalizations, and fatalities, getting more people fully vaccinated remains the key.
99.1% of the US has seen 1-dose penetration >40%…
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 45%/45%/50% of its residents fully vaccinated, displayed as the orange line on the chart. Currently, 87.3% of US states have seen 40% of their residents fully vaccinated. However, when looking at the percentage of the US with at least 45% of its residents fully vaccinated, this figure is 64.7%. And only 44.5% of US (by state population) have seen 50% of its residents fully vaccinated.
– While 99.1% of US states have seen vaccine penetration >40%, 93.4% of them have seen 1 dose penetration >45% and 78.1% of them have seen 1 dose penetration > 50%.
– 87.3% of the US has at least 40% of its residents fully vaccinated, However, only 64.7% of US has fully vaccinated >45% and 44.5% of US has fully vaccinated >50%.
This is the state by state data below, showing information for individuals with one dose and two doses.
The ratio of vaccinations/ daily confirmed cases has been falling significantly (red line is 7D moving avg). Both the surge in daily cases and decrease in daily vaccines administered contributed to this.
– the 7D moving average is about ~15 for the past few days
– this means 15 vaccines dosed for every 1 confirmed case
In total, 340 million vaccine doses have been administered across the country. Specifically, 187 million Americans (56% of US population) have received at least 1 dose of the vaccine. And 162 million Americans (49% of US population) are fully vaccinated.
POINT 3: Tracking restrictions lifting and subsequent effects in individual states
Point #3 focuses primarily on tracking the lifting of restrictions, as states have eased the majority of mandates. Keep in mind, easing/lifting restrictions are contingent upon state of emergency ordinances being renewed.
– States in groups 1 and 2 represent states that let their emergency ordinances expire, or that never had one in the first place
– Note: IL and HI are not listed. This is because restrictions lifting is determined at the county / island level, and no statewide policy will be established to lift restrictions until a full reopening
So there is a spectrum of approaches. Our team is listing 3 tiers of states and these are shown below.
– states that eased all restrictions in 2020: AK, OK, MO, FL, TN
– states that have eased all restrictions in 2021 to now: ND, SD, NE, ID, IA, MT, MS, AZ, SC, WY, TX, GA, AR, KS, WI, IN, AL, UT, NH, LA, NJ, KY, MN, MA, VT, OH, WV, ME, MI, NY, OR, PA, MD, DE
– states that are still easing restrictions in 2021: WA, NC, CA, NM, CO, NV, CT, VA, RI, DC
GROUP 1: States that lifted restrictions in 2020…
The daily case trends in these states are impressive and it is difficult to say that lifting restrictions has actually caused a new wave of cases because the case trends in these states look like other states.
GROUP 2: States that have lifted restrictions in 2021 to now…
Similar to the list of states above, the daily case trends in these states are impressive and it seems that lifting restrictions hasn’t caused an increase in cases.
GROUP 3: States that are still easing restrictions in 2021…
These states have begun to lift restrictions, but have yet to ease all restrictions. The date of each state’s most recent restrictions lifting is indicated on each chart. The case trends in these states have been mostly positive.
– Easing restrictions appears to have contributed to an increase in cases in several of these states, most drastically in OR, ME, WA, and MN
