Canadian researchers explain why double-vaxxed Canadians more likely to test positive on COVID-19
There is a curious statistical trend in the COVID-19 infection rate in Canada. Those Canadians who are double vaxxed are more likely to test positive than their non-vaxxed Canadian counterparts:

  • double-vaxxed is 89 per 100,000 people confirmed case rate
  • unvaxxed is 68 per 100,000 people confirmed case rate

So oddly, double vaxxed Canadians are seeing a higher rate of confirmed cases. The article below offers two explanations for this:

  • vaxxed people are more likely to seek PCR testing, for employment, vacations, etc
  • vaxxed people are more likely “put at risk” by going to restaurants, going to work, gyms, theaters, etc

This might be the factor. I found it interesting. I have not seen the same statistics for the US, but I am curious.

…Despite “markets” yawning about Omicron, the hit on consumer spending is comparable to Delta
As Omicron fades across the US, the natural question is whether we can expect a bounce in consumer spending. The chart from JPMorgan on Chase credit card data shows the impact on consumer spending due to Omicron:

  • Omicron impact was notable on airlines, lodging and travel
  • Omicron impact similar to the hit seen on Delta
Retail Sentiment is Now The Worst Since April 2014, An 8-yr New Low In Sentiment

STRATEGY: Retail sentiment is so bad, it points to violent upside in the next 3 months
The fragility of equity markets has continued this week, but with a slightly better tone:– instead of making new lows, like last week

  • instead of making new lows, like last week
  • equities seem to be basing
  • after an 11% decline in 14 days
  • equities seem to be steadily strengthening
  • as we know, less bad is good

Thus, in our view, the message from markets is that much of the bad news is priced in. And as such, if a corresponding alignment of sentiment and positioning is in place, we could see stocks soon stage a sustainable rally. It seems that sentiment has already aligned itself — that is, sentiment is now extremely bearish. And at the extremes, that is a contrarian buy signal.

Retail Sentiment is Now The Worst Since April 2014, An 8-yr New Low In Sentiment

…AAII % bulls less bears is the worst since the start of the pandemic
AAII retail sentiment (American Association of Individual Investors) is released every Thursday and yesterday’s reading is a new low in retail sentiment.

  • % bulls less % bears is -29.8
  • the worst ever reading since the start of the pandemic (see below)

Does it make sense that investors are more bearish now than at any time since the pandemic started? I find this a startling negative sentiment reading. And for background, we view the AAII retail sentiment indicator as among the most reliable of sentiment indicators and our team has been using this series for the past 12 years. And this series has been published since 1987.

Retail Sentiment is Now The Worst Since April 2014, An 8-yr New Low In Sentiment

…Current sentiment ranks among the 5 worst since 2009 = violent upside
In fact, zooming out a little further, this is among the top 5 worst sentiment readings since 2009. Take a look below:

  • the current -29.8%
  • is the 3rd worst since 2009
  • there are 6 precedent instances where sentiment is this bad
Retail Sentiment is Now The Worst Since April 2014, An 8-yr New Low In Sentiment

6 of 6 times, we saw a violent rally — mean 12-month gain is 32%
And take a look at the forward returns from those 6 precedent instances:

  • 6 of 6 times, stocks higher 3M later
  • mean gain 13.8%
  • 5 of 6 times, stocks higher 1M later
  • mean gain 8.4%
  • 6 of 6 times, stocks higher 6M and 12M later
  • mean gains 19% and 32%

These are absolutely astonishing gains. My takeaway? There might be some limited further downside for stocks, given the enormous technical damage.

  • but the risk/reward is very strong for stocks here
  • hence, this corroborates the incrementally positive views by Mark Newton and Brian Rauscher (see prior comments)
Retail Sentiment is Now The Worst Since April 2014, An 8-yr New Low In Sentiment

Even taking a further step back, whenever retail sentiment is in the bottom decline (below -15%), forward returns are very good for stocks in the next 6 months. This is data since 1987.

Retail Sentiment is Now The Worst Since April 2014, An 8-yr New Low In Sentiment

…Good earnings are not offsetting the “buyers’ strike”
We are still early in the 4Q2021 earnings season. As shown below, only 23% of the companies reported:

  • 83% are beating
  • mean surprise is 2.2%

But the relative return of stocks has been weak. The top 3 sectors for relative performance are:

  • Energy + 26.5% (vs S&P 500)
  • Financials + 7.4%
  • Consumer Staples + 5.1%

To me, the cyclical leadership of Energy and Financials is appropriate. Energy benefits from structural shortage plus the relatively attractive equity value. And Financials benefit due to rising rates.

  • Consumer Staples outperformance, in our view
  • reflects P/E expansion for a group that has seen massive P/E compression
  • and arguably, reflect possibly easing supply chain restrictions
  • Staples are actual products
  • not “electronic” or services or experiences
  • actual goods moving

Thus, their outperformance is somewhat eye catching to me.

Retail Sentiment is Now The Worst Since April 2014, An 8-yr New Low In Sentiment

Figure: Way forward ➜ What changes after COVID-19
Per FSInsight

Retail Sentiment is Now The Worst Since April 2014, An 8-yr New Low In Sentiment

Figure: FSInsight Portfolio Strategy Summary – Relative to S&P 500
** Performance is calculated since strategy introduction, 1/10/2019

Retail Sentiment is Now The Worst Since April 2014, An 8-yr New Low In Sentiment

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