Click HERE to access the FSInsight COVID-19 Daily Chartbook.
We publish on a 4-day a week schedule:
SKIP MONDAY — President’s Day
Tuesday
Wednesday
SKIP THURSDAY
Friday
STRATEGY: Rates possibly peaking is 1 of 4 reasons the “bond hawks” are winning this battle, but losing the war
Policymakers recognizing COVID-19 isn’t a crisis at this point…
Absent a new and worrisome variant emergence, COVID-19 is diminishing drastically across the US. The pace of this retreat is lightning fast and has even prompted policymakers to acknowledge that it may be time to consider the phase where “covid isn’t a crisis”
– practically speaking, this is great news for all Americans
– at the back of my mind, I am aware variants can emerge
But as much as Omicron has burned through much of Western Europe, Africa and US, it is still surging throughout Asia. For instance, Hong Kong is now seeing 6,000 cases per day (was 2,000 just a few days ago) and this compares to 13,000 total cases since 2020. So it is a massive surge.
Vax during pregnancy passes onto infants = good
And the need for vaccinations will remain a forefront issue because even as COVID-19 has retreated, we might see:
– seasonal flare ups
– variant risk
And the same tough question comes up for children and infants. Fortunately, it looks like a study cited by the CDC shows that pregnant mothers pass on the antibodies to infants. This should be seen as a relief for parents who worry about infant protection.
– vaccinations are an option
– but with anti-viral pills now available
– the question remains whether vaccination is best course, or taking a first line treatment
STRATEGY: Rates possibly peaking is 1 of 4 reasons the “bond hawks” are winning this battle, but losing the war
In case you missed it, on Wed evening, Mark Newton, Head of Technical Strategy at Fundstrat, comments about rates were eye opening. Check out the headline below:
– basically, Mark is noting he thinks interest rates will peak in March
– and head lower
As we know, the rise in rates has been sending increasingly large ripples of panic across equity markets. Thus, a peak in rates is a big deal. Big deal.
I asked Mark where he thinks the 10-yr hits resistance. His answer is below:
– basically, he sees rates peaking not too much higher than current levels
– even in the midst of the selling yesterday, the 10-yr yield actually fell
If Newton’s view is correct, the reversal lower in rates will be a positive for risk assets.
Second, Fed Fund futures historically too hawkish, thus, if market consensus is 7 hikes, that is “several hikes too many”
Another factor weighing on stocks has been the accelerating “hike forecasts” by economists. As shown below, another investment bank is calling for 7 hikes in 2022, above the current 6 priced in by the Fed fund futures market.
But take a look at the historical accuracy of Fed Funds futures markets. This is data compiled by our data science team, led by tireless Ken. As shown:
– from 2009 to 2016
– Fed fund futures markets
– chronically overshot how many hikes the Fed would do
Are we are “max hike hysteria”? Maybe. It really depends on the forward path of inflation.
Third, vehicle prices might be apexing in the US, both used and new and that will be “deflationary”
Autos have accounted for 50% of the rise in CPI. And there are signs that auto prices may be cooling, as production is catching up with demand. In fact, JPMorgan economists note that vehicle prices could actually decline. In fact, while they lay out a range of scenarios, a key consideration is this:
– if auto prices are “flat”
– CPI impact is 0% inflation
– Autos new and used added +1.97% to CPI in 2021
– thus, that is a massive swing
– if prices fall outright
– this is deflation
– JPMorgan even posited prices could fall 20%
– this would be -1% CPI, or a massive 300bp swing
As shown below, of the +397bp increase in CPI, cars were half of that, or +193bp
Fourth, Russia/Ukraine 5 of 5 times, markets “sell the buildup, buy the invasion” –> markets bottom just before guns are fired
The armed conflict is underway in Russia/Ukraine. While we do not know the extent of this hostility, there is an adage about wartime. I first heard this from an Atlanta-based client around the 2001 Afghan conflict:
– “sell the buildup, buy the invasion”
– meaning, markets sell off into the risk of conflict
– and stabilize once the conflict starts
If one listens to pundits, many are advising to stay “risk-off” because there is little visibility on the extent of the conflict. But this is not what history suggests.
Take a look below. We highlighted the 5 most recent armed conflicts that impacted markets broadly.
– 5 of 5 times
– stocks bottomed at the invasion or just before the invasion
This is counter to what many think. In fact, many might logically believe that uncertainty from conflict means “risk off” until the conflict ends. This is not the case.
BOTTOM LINE: Bond hawks are winning this battle but losing the war
We think there is growing tension between what bond market complex (hedge funds, bond managers, investment banks) and what the stock market wants. That is, credit markets want a recession, so interest rates can fall, leading to a recovery in bond prices. This is something we will highlight in upcoming reports.
– while markets are roiled by the dual issues of Fed hikes + Russia/Ukraine
– we think investors are overly pessimistic
We still see upside to stocks before month-end.
STRATEGY: 2022 theme –> BEEF –> Bitcoin (B) + Bitcoin equities (E) + Energy (E) + FAANG (F)
Our 2022 themes are shown below. And in not in any order:
– Bitcoin + Bitcoin Equities BITO -2.33% GBTC -2.28% BITW 1.05%
– Energy
– FAANG FNGS 0.89% QQQ 0.36%
Combined, it can be shorted to BEEF.
– Homebuilders (Oct – Apr aka Golden 6 months) XHB -0.76%
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33 Granny Shot Ideas: We performed our quarterly rebalance on 2/3. Full stock list here –> Click here
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POINT 1: Daily COVID-19 cases 97,538, down -64,141 vs 7D ago…
Current Trends — COVID-19 cases:
- Daily cases 97,538 vs 161,679 7D ago, down -64,141
- 7D positivity rate 9.5% vs 13.5% 7D ago
- Hospitalized patients 66,084, down -27% vs 7D ago
- Daily deaths 2,191, down -14% vs 7D ago
The latest COVID-19 daily cases came in at 97,538, down -64,141 vs 7D ago. The 7D average in daily cases has dropped to 112,072, a level we have seen at the start of Omicron surge. At state level, all states reported lower cases except Maine (+2,669) and South Dakota (+38). But the recent case rise in Maine was primarily due to the backlog cases that accumulated during the Omicron surge. In fact, the number of COVID patients currently hospitalized in Maine has fallen to 3-month low.
Over the past week, the most important development on COVID-19 was that the daily COVID-19 mortalities finally rolled over. And similar to what we have observed in other COVID metrics, daily mortalities have been falling rapidly – daily deaths have fallen 16% from its peak.
The trend in positivity rate also looks promising. The 7D average of daily positivity rate finally fell below 10%. 10% is a level we view as “things under control”. And according to policymaker’s responses in prior waves, many COVID related restrictions also start to get eased when positivity rate falls below that level. Therefore, falling below 10% is great news and a sign that we are closer to “normal.”
Next week, we are likely to see some data distortion due to the Presidents’ Day holiday. This is also the first major holiday after many states lifted their mask mandate recently. Hence, the COVID trends following the holiday are also worth watching.
7D delta in daily cases has been negative in 28 of past 29 days…
The 7D delta in daily cases remains in the negative regime and the overall trend has been stable. This reflected the steady decline in daily cases. Over the past few days, the 7D delta has shrank slightly, but this is primarily because the daily cases have fallen so much. And as we shown in previous notes, the actual speed of decline has not slowed in term of percentage change.
All US states are seeing decline in daily cases now…
*** We’ve split the “Parabolic Case Tracker” into 2 tables: one where cases are falling (or about to fall), 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
Daily deaths are still rising, while positivity rates and hospitalization are falling now…
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 hospitalization started to roll over. And more importantly, the daily mortality did not follow the same pattern as hospitalization, which shows Omicron is less deadly compared to other variants (at least so far).
- Positivity rate finally started to fall after plateauing for two weeks. It also confirms the recent decline in daily cases.
POINT 2: VACCINE: vaccination pace has slowed recently… Still more than half of eligible people have not received their booster shots…
Current Trends — Vaccinations:
– avg 0.6 million this past week vs 0.6 million last week
– overall, 28.2% received booster doses, 64.4% fully vaccinated, 75.8% 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 above 100% combined penetration
– 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 1,696,478 doses administered, as reported on Thursday. We think this sudden jump in vaccinations is most likely due to some data distortion (backlog vaccination data?). It also could be due to the Presidents’ Day long weekend that many people are planning for social gathering (less likely). We are still looking for the explanation on the sudden rise. That said, as more and more states lift their COVID-19 restrictions, vaccination remains a key to support us to smoothly transition back to “Normal”.
This is the state by state data below, showing information for individuals with one dose, two doses, and booster dose.
In total, 548 million vaccine doses have been administered across the country. Specifically, 251 million Americans (76% of US population) have received at least 1 dose of the vaccine. 214 million Americans (64% of US population) are fully vaccinated. And 94 million Americans (28% of US population) received their booster shot.
POINT 3: Tracking the seasonality of COVID-19
***We’ve updated the seasonality tracker to show figures from the last 9 months, from this calendar day, in each of the last two years***
As evident by trends in 2020 and 2021, seasonality appears to play an important role in the daily cases, hospitalization, and deaths trends. 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
– Opposite effects hold true in the winter
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.
