Summary List Positioning
A record rise in daily COVID-19 cases over the past week has actually taken into concern the sustainability of the so-called reopening trade as concerns grow over the capacity for more lockdowns this winter season.
There is capacity for daily infection cases to surge past 200,000 this week, according to Fundstrat’s Tom Lee, however however, financiers ought to remain bought the “epicenter stocks.”
Positive results from COVID-19 vaccine candidates established by Pfizer and Moderna helped spark a rally in the resuming trade, and enhancing COVID-19 treatments could keep the rally going, Lee stated in a note on Monday.
Detailed below are reasons why investors ought to continue to purchase the resuming trade, according to Fundstrat.
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Favorable COVID-19 vaccine data from Pfizer and Moderna have helped stimulate a rising rally in the reopening trade, or buying stocks that benefit the most from the physical resuming of the economy: restaurants, hotels, airline companies and so on
. However with a resurgence in COVID-19, some investors are casting doubt on whether the rally in these so-called “epicenter” stocks is sustainable, Tom Lee of Fundstrat stated in a note on Monday.
The doubt stands, as there is no sign yet of a peak in US daily cases, and the rollout of COVID-19 vaccines to the general population is still months away.
” In fact, it looks like the United States will go beyond 200,000 day-to-day cases sometime this week,” Lee said.
However rather than pull back from the reopening sell the face of surging infection cases, Lee is doubling-down.
Laid out below are the 7 reasons why Lee remains dedicated to the reopening trade, according to the note.
1. “Vaccine momentum dramatically strengthening = bring us closer to post-pandemic world,” Lee stated.
Over the previous week, effectiveness data of more 90%for Pfizer’s COVID-19 vaccine candidate, and 94.5%for Moderna’s prospect. Both firms are seeking emergency situation usage authorization from the FDA
2. “Treatments are seeing large improvements, including Olumiant, reducing the risk of “complete lockdowns,” Lee stated.
Lee highlighted that a Swedish study discovered the drug Olumiant, established to deal with rheumatoid arthritis, “was revealed to decrease COVID-19 mortality by 71%,” Lee said, including that the drug was discovered to protect patient lungs from the disastrous respiratory impacts of the infection. The drug was likewise revealed to be reliable for senior clients, Lee stated.
” By securing the vulnerable, this lowers the need for pursuing lockdowns,” according to Lee.
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3. “US cases are surging but the associated coefficient for hospitalizations and deaths is lower,” Lee said.
While the current wave of the infection is still raving on, deaths and hospitalizations have not yet surged above the peaks seen during the first wave previously this year like day-to-day cases have. While daily deaths have been on the increase in current weeks, they are 75%listed below the peak reached throughout the first wave, according to the note.
4. “United States governors are pursuing targeted lockdowns, not ‘full stay at house’ order = excellent news,” Lee stated.
With lower levels of mortality from COVID-19, the need for cities and states to pursue complete lockdowns “is much lower,” according to Lee. One recent example is the prompting of New York City mayor Expense DeBlasio to reevaluate his strategy to close all schools by New york city guv Andrew Cuomo.
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5. “Europe COVID-19 cases are rolling over,” according to Lee.
6. “$ 4.5 trillion of money on the sidelines is lastly moving into stocks,” Lee highlighted.
7. “China and Asia are back to typical,” Lee kept in mind..
” Our company believe the risk/reward is still favorable for epicenter stocks,” Lee stated, despite the rise in everyday cases of COVID-19 And with investor consensus still hesitant of the reopening trade, “the placing might also agree with,” Lee stated.
” We see profits upside the greatest in these [reopening] names in 2021, given the operating utilize (expense cutting) plus potential topline tailwinds,” Lee said.
Those tailwinds consist of the potential for more international financial stimulus and a global healing in demand, Lee concluded.
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