Omicron is 13% of cases in NY/NJ from 0% two weeks ago. Wednesday FOMC day = buy on the event

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STRATEGY: FOMC Day = local turning point

Omicron is 13% of cases in NYC
The CDC has provided some updated data on Omicron’s estimated share of cases. This has been compiled by our data science team, led by tireless Ken. As shown below:

– Omicron is 13% of the cases in NY/NJ area (no idea why VI/PR are included)
– other regions show a far smaller share
– but the fact that it is 3% of USA overall cases means closing borders makes little sense

…time series shows Omicron went from zero to 13% within two weeks, crowding out Delta
Delta has been the prime variant in NY/NJ since September. But as of the latest period:

– Omicron is now 13% of cases
– it was 0% a few weeks ago
– Delta is basically the rest of cases
– no other variants are spreading

Over the next few weeks, it would make sense to see Omicron surge to 100% of cases.

So, it would be logical to expect USA cases to begin curling upwards as Omicron share surges. So the state of cases currently is not a reflection of where cases could be in the next few weeks:

– cases could surge to 200,000 in late-January
– but hospitalizations and deaths, we expect, would severely lag

GOOD NEWS: Pfizer announced Phase 2/3 of Oral Antiviral effective against Omicron
Pfizer announced the results of a Phase 2/3 trial of its COVID-19 antiviral pill. In general, the study results affirm that the Pfizer pill is robust:

– there is a 10-fold decrease in viral load
– the drug is a protease inhibitor and is shown to be effective against Omicron

Overall, this is very good news. There are many Americans who are not vaccinated, and these antivirals would play a major role in mitigating the severity of COVID-19. And the efficacy of the pill is similar to a vaccine.

STRATEGY: Buyers strike into FOMC meeting, but we expect a “buy the news” rally
Equities were again weak on Tuesday, as investors remain on a buyers strike in front of the FOMC meeting. It is widely expected that the Fed will announce a tapering of bond purchases.

– as we stated in prior notes, tapering is not the “hawkish pivot” that ends bull markets
– but it is a hawkish pivot relative to the massive easing since the pandemic started
– so we think this buyers strike in front of FOMC could turn into a “buy the event”

It was also encouraging to see markets rally intraday on Tuesday (see below).

– the S&P 500 is still near its all-time highs
– sentiment has collapsed in the past two days
– so we think the odds favor a “buy the event” rally

SECTORS: Leadership still Cyclicals/Early-cycle aka Epicenter
Relative sector performance is shown below and as we can see, 5 sectors are showing positive relative trend:

– Energy
– Basic Materials
– Technology
– Transports
– Discretionary

– sort of Financials/Banks

These are all cyclical groups. And also have general positive exposure to reflationary trends. Inflation, incidentally, in isolation is not a bad word. The real risk to markets is:

– too much inflation hurting consumer confidence
– or unanchored inflation expectations, fear of uncontained inflation

This is not necessarily what markets seem to be pricing. If markets were worried about either of the above, Defensive stocks or Growth stocks would be leading. Instead, we are seeing Cyclicals lead.

Into YE, our recommended strategies are:

– Energy
– Homebuilders (Golden 6 months) XHB
– Small-caps IWM 0.05%
– Epicenter XLI 0.11%  XLF 0.60%  XLB 0.85%  RCD
– Crypto equities BITO 2.64%  GBTC 2.72%  BITW 3.20%

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 107,498, up +3,989 vs 7D ago…

Current Trends — COVID-19 cases:

• Daily cases 107,498 vs 103,509 7D ago, up +3,989
• Daily cases ex-FL&NE 102,595 vs 98,319 7D ago, up +4,726
• 7D positivity rate 8.0% vs 7.6% 7D ago
• Hospitalized patients 62,354, up +11.3% vs 7D ago
• Daily deaths 1,258, down -0.5% 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 107,498, up +3,989 vs 7D ago. The Thanksgiving distortion appears to be cleared out as per the more consistent trend in the recent data. As such, Wave 4 is clearly underway; this is not surprising, and is our base case. We expect this surge to peak below the wave 3 peak of 300,000 cases per day. Case roll over will likely resume in the near future as booster vaccine rates are increasing.

Rolling 7D delta Thanksgiving distortion beginning to clear out…
The rolling 7D delta Thanksgiving distortion is beginning to clear out as evident by the more consistent trend in the data. Nonetheless, we’ll continue to monitor the data closely.

33 states are seeing a rise in cases while cases continue to decline in the remaining states…
*** We’ve split the “Parabolic Case Tracker” into 2 tables: one where cases are falling, and the other where cases are rising

In these tables, we’ve included the vaccine penetration, case peak information, and the current case trend for 50 US states + DC. The table for states where cases are declining is sorted by case % off of their recent peak, while the table for states where cases are rising is sorted by the current daily cases to pre-surge daily cases multiple.
– The states with higher ranks are the states that have seen a more significant decline / rise 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 acceleratesas boosters become more widely available…

***The Thanksgiving distortion appears to be cleared out.

Current Trends — Vaccinations:
– avg 1.9 million this past week vs 1.8 million last week
– overall, 60.5% fully vaccinated, 71.5% 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 90% combined penetration
– Given the 2.5x multiplier, all states besides AR, HI, LA, MS, IN, WA, WV, OR, TX, OH, ID, MI, MO, and GA 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

There were a total of 1,207,513 doses administered reported on Tuesday down 21% vs 7D ago. With the introduction of the Omicron variant, we’ve been seeing the vaccination pace accelerate. 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.

This is the state by state data below, showing information for individuals with one dose and two doses.

In total, 438 million vaccine doses have been administered across the country. Specifically, 237 million Americans (72% of US population) have received at least 1 dose of the vaccine. And 201 million Americans (61% 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.