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Friday
STRATEGY: Is Pfizer COVID-19 pill catalyst to move country to “middle” as it eliminates need for a vaccine mandate. 19 stocks that could soon join “everything YE rally”
COVID-19 is flaring across Europe…but hospitalizations only really rising in Greece
While COVID-19 is in retreat in the US (for now), COVID-19 continues to flare up elsewhere:
– China and Asia still dealing with Delta-variant
– Europe has seen case double in the past 6 weeks (see below)
The flare up in Europe is peculiar, as it is not continent-wide. It is showing up in a handful of nations.
Source: Johns Hopkins
…UK, Germany, Netherlands and Greece but hospitalizations only really flaring up in Greece
What is different about Europe’s surge is that it is not across the whole continent. Perhaps this is just a matter of time, but that is the mystery of COVID-19:
– UK was first to see Delta-variant surge
– Germany, Netherlands and Greece now seeing similar surge
– Hardly apparent in France, Spain, Italy
– A surge in hospitalizations are only visibly apparent in Greece
CATALYST FOR THE GREAT MODERATION: Pfizer COVID-19 pill basically eliminates need for a vaccine
Last Friday, Pfizer announced its antiviral pill cut hospitalizations by 90% and virtually eliminates risk of death (no deaths in the trial). Here are some quick details of the pill:
– pill taken in oral form
– cost of production is far lower than a vaccination dose
– only needs to be given to those infected
– trial was 775 adults
Financial markets responded strongly to the announcement, particularly triggering a panic out of the “stay at home” stocks, and a commensurate panic into Epicenter stocks.
– But a larger implication, in our view, is the potential to make eliminate the need for a vaccine mandate
Panic of the house as “stay at home” stocks implode on Pfizer news
The financial market reaction to the Pfizer news is apparent below:
– Stay at home stocks got gut punched
– Makes sense since the Pfizer pill could essentially change the path of COVID-19 to make it a treatable condition
– CHGG EBS PTON Z ZG MRNA ZM
…Epicenter stocks surge, more evidence these are not “crowded trades”
Similarly, Epicenter stocks surged over the past week. Look at:
– Airlines, Cruises and Hotels, in particular JETS BEDZ TRYP
– They gapped up sharply Friday
– We continue to see Epicenter as the beneficiary of a return to “normal” XRT PLNT LYV
– But the surge last week shows that these are not crowded trades
GREAT MODERATION: Will Pfizer pill essentially obviate need for vaccination?
The Pfizer pill is an extraordinary development — even if we reasonably expected a pill to eventually be developed:
– Pfizer pill effectiveness is comparable to an mRNA vaccine
– Both prevent 90% of COVID-19 hospitalizations
– Assuming mRNA vaccines have breakthrough cases, which is the case
– Mortality is possibly better with Pfizer pill (zero deaths, but only 775 in trial)
– Pfizer pill is less expensive than vaccine
– Does not need to be mandated across the whole population of a region
– Only those infected
– Key question
– If pill is indeed effective, why have a vaccine mandate?
This last question is key. As many know, vaccination and anti-vaccine is a sizable divide in the nation at the moment, and as such, is a politically divisive issue. But if the pill is indeed this effective, we think the whole need for a vaccine mandate is obviated.
…Dr Gottlieb comment on federal OSHA vaccine mandate hits on this issue
I found this tweet by Dr Scott Gottlieb interesting. Dr Gottlieb has warned, in the past, that federal vaccine mandates could backfire. And while he is an advocate of vaccinations, he understands the practical issues around mandates.
– his rhetorical question is how OSHA requirements now, given high vaccine penetration
– makes any difference
– add in the benefit of a therapeutic pill
– and this may make vaccine mandates needless –> food for thought
Washington passes $1T infrastructure bill
On Friday, the House also passed the $1.2T infrastructure bill. This bill was previously voted and approved by the Senate. Thus, the final step is President Biden signing this into law. This bill was expected to pass, so it is not necessarily something that should move markets — but its passage is a further affirmation that investors need to be more cyclically tilted — aka Epicenter.
STRATEGY: Our base case remains “everything rally into YE”
To an extent, our base case for an everything rally into YE reflects the fact that investors and Street consensus got overly negative during the summer of 2021. Recall, the numerous headwinds cited:
– supply chain glitches
– inflation risk
– tight labor markets
– Fed is behind
– stagflation
– Washington shutdown
– China covid surge
– China war with Taiwan
– Delta variant surge
– vaccine risks from J&J
– anti-vax protests
…Consumer confidence about equity markets collapsed
And look at how consumer confidence about equity markets collapsed. The October survey (came out late Oct) shows that:
– 33% of respondents expects stocks to rise in next 12M
– lowest reading since March 2020
– respondents are the most skeptical on equities since start of pandemic
Stocks have only been rallying for 4 weeks. Would this bearishness be sufficiently reversed after 4 weeks? We doubt it considering this skepticism has been building throughout 2021.
Nasdaq 100 up 9 days in a row –> since 1999, 11 of 11 times, QQQ higher in 8 weeks = YE everything rally
This tweet by Jonathan Harrier, CMT is quite interesting @jonathanharrier.
He notes that Nasdaq 100 (QQQ) is up 9 days in a row:
– happened 11 times since 1999
– 11 of 11 times, QQQ higher in two months
– aka YE in this context
– avg gain is 4.3%
This sure looks like the everything YE rally is intact.
BOTTOM LINE: 19 stocks that could soon participate
We have listed 19 stocks below that have been punished over the summer. But we have reasons to expect them to rally into YE:
– stocks viewed as technically attractive by Mark Newtown, head of Technical Strategy at Fundstrat
– stocks are in Russell 3000
– DeMark indicators recently registered a new buy signal
– That is, DeMark shows a ’13 combo buy countdown’ –> these stocks should be bottoming now
The tickers are:
– 7 Growth Ideas: EVER QTNT CORT INFN PYPL IIIV MVIS
– 7 Core Ideas: AMCX ATUS LSF ATHX EHC KALA CDZI
– 5 Value Ideas: LBRDA KDNY NKTX UHS HY
Our recommended strategies are:
– Energy
– Homebuilders (Golden 6 months) XHB
– Small-caps IWM
– Epicenter XLI XLF XLB RCD
– Crypto equities BITO GBTC BITW
Into 2022…
– Industrials
30 Granny Shot Ideas: We performed our quarterly rebalance on 10/25. Full stock list here –> Click here
POINT 1: Daily COVID-19 cases 16,249, up +5,301 vs 7D ago…
Current Trends — COVID-19 cases:
- Daily cases 16,249 vs 10,948 7D ago, up +5,301
- Daily cases ex-FL&NE 16,249 vs 10,009 7D ago, up +6,240
- 7D positivity rate 4.8% vs 5.0% 7D ago
- Hospitalized patients 42,434, down -6.3% vs 7D ago
- Daily deaths 1,165, down -9.7% 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.
The latest COVID daily cases came in at 16,249, up +5,301 vs 7D ago. The 7D deltas have been somewhat flat recently, and as seen below the speed of case rollover appears to be slowing. As booster shots are becoming more widely available, the speed of case rollover should increase once again.
Rolling 7D delta in daily cases is flat…
The rolling 7D delta is currently flat as the speed of case rollover has slowed. As booster shots are becoming more widely available, the speed of case decline should resume and the rolling 7D delta should once again turn negative.
Low vaccinated states seem to have a larger increase in daily cases compared to their recent low…
*** We’ve updated the “Parabolic Case Surge Tracker” to measure case % off recent peak as the more recent “delta surge” is rolling over.
In the table, we’ve included both the vaccine penetration, case peak information, and the current case trend for 50 US states + DC. The table is sorted by case % off of their recent peak.
- The states with higher ranks are the states that have seen a more significant decline in daily cases
- We also calculated the number of days during the recent case surge
- The US as a whole, UK, and Israel are also shown at the top as a reference
Hospitalizations, deaths, and positivity rates are rolling over amidst case rollover…
Below we show the aggregate number of patients hospitalized due to COVID, daily mortality associated with COVID, and the daily positivity rate for COVID.
– Net hospitalizations peaked below the Wave 3 peak and are currently rolling over
– Daily death peaked slightly above the Wave 2 peak and are currently rolling over
– As per the decline in daily cases, the positivity rate is currently rolling over
POINT 2: VACCINE: vaccination pace accelerates as boosters become more widely available…
Current Trends — Vaccinations:
- avg 1.2 million this past week vs 1.2 million last week
- overall, 58.0% fully vaccinated, 66.8% 1-dose+ received
Vaccination frontier update –> all states now near or above 80% combined penetration (vaccines + infections)
*** We’ve updated the total detected infections multiplier from 4.0x to 2.5x. The CDC changed the estimate multiplier because testing has become much better and more prevalent.
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
– Given the new multiplier. only RI, FL, MA, CT, NM, NY, NJ, IL, CA, PA, DE, SD, KY, UT, OK, ND, NH, AZ, SC, TN, AK, NC, CO, KS, and MN 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%/100%. As you can see, all states have reached combined infection & vaccination > 100% (Reminder: 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 the state is either infected or vaccinated).
There were a total of 1,475,754 doses administered reported on Sunday, up 5% vs. 7D ago. We are seeing the vaccination pace accelerate as booster shots are becoming more widely available. Also, the same catalysts remain in place:
- Proof of vaccination required by many US cities and venues
- Booster shots
- Full FDA approval of Pfizer COVID vaccines (hopefully it could help overcome vaccine hesitancy)
- Biden’s vaccination plan
The daily number of vaccines administered remains the most important metric to track this progress and we will be closely watching the relevant data.
74.7% of the US has seen 1-dose penetration > 60%…
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 lines on the chart. Currently, 100% 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 98.7%. And only 88.5% of US (by state population) have seen 50% of its residents fully vaccinated.
We have done similarly for residents with at least 1-dose of the vaccination, denoted by the purple lines on the chart. While 98.9% of US states have seen 1 dose penetration > 50%, 90.9% of them have seen 1 dose penetration > 55% and 74.7% of them have seen 1 dose penetration > 60%.
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 ~22 for the past few days
– this means 5 vaccines dosed for every 1 confirmed case
In total, 414 million vaccine doses have been administered across the country. Specifically, 222 million Americans (68% of US population) have received at least 1 dose of the vaccine. And 192 million Americans (59% of US population) are fully vaccinated.
POINT 3: Tracking the seasonality of COVID-19
In July, we noted that many states experienced similar case surges in 2021 to the ones they experienced in 2020. As such, along with the introduction of the more transmissible Delta variant, seasonality also appears to play an important role in the recent surge in daily cases, hospitalization, and deaths. Therefore, we think there might be a strong argument that COVID-19 is poised to become a seasonal virus.
The possible explanations for the seasonality we observed are:
– Outdoor Temperature: increasing indoor activities in the South vs increasing outdoor activities in the northeast during the Summer
– “Air Conditioning” Season: similar to “outdoor temperature”, more “AC” usage might facilitate the spread of the virus indoors
If this holds true, seasonal analysis suggests that the Delta spike could roll over by following a similar pattern to 2020.
We created this section within our COVID update which tracks and compare the case, hospitalization, and death trends in both 2020 and 2021 at the state level. We grouped states geographically as they tend to trend similarly.
CASES
It seems as if the main factor contributing to current case trends right now is outdoor temperature. During the Summer, outdoor activities are generally increased in the northern states as the weather becomes nicer. In southern states, on the other hand, it becomes too hot and indoor activities are increased. As such, northern state cases didn’t spike much during Summer 2020 while southern state cases did. Currently, northern state cases are showing a slight spike, especially when compared to Summer 2020. This could be attributed to the introduction of the more transmissible Delta variant and the lifting of restrictions combined with pent up demand for indoor activities.
HOSPITALIZATION
Current hospitalizations appear to be similar or less than Summer 2020 rates in most states. This is likely due to increased vaccination rates and the vaccine’s ability to reduce the severity of the virus.
DEATHS
Current death rates appear to be scattered compared to 2020 rates. This is likely due to varying vaccination rates in each state. States with higher vaccination rates seem to have lower death rates given the vaccine’s ability to reduce the severity of the virus; states with lower vaccination rates seem to have higher death rates.
