Forget FAANG Stocks, Watch FAACT State Infection Rates For The Direction Of Equity Markets

FAACT State (FL, AZ, AL, CA, TX) infection rates have nearly tripled since reopening.

If businesses are forced to suspend or severely curtail operations again, that would be devastating fore the economy.

Watch the FAACT state infection rate for clues to the direction of equity markets.

Forget FAANG Stocks, Watch FAACT State Infection Rates for the Direction of Equity Markets

FAACT states (Florida, Arizona, Alabama, California, and Texas) have seen a near tripling of their weekly infection rate since reopening. If business in these states are forced to close or even just significantly restrict operations in the face of rising infections, dreams of a “v” shaped economic recovery could turn into the nightmare of an “L” shaped economic outlook.

Since reopening, the FAACT states have seen a near tripling of weekly infections. Weekly infections increased from 24,616 reported cases for the period April 24 to May, to more than 72,000 reported cases reported during the period June 10 to June 17.

Source: USA Facts

This monumental increase means that these five states alone now account for 45% of new weekly U.S. infections! This is up from 12% before reopening in these states.

Source: USA Facts

What happens if businesses in these five states are forced to suspend or significantly curtail operations? It would be devastating for the U.S. economy.

  • These five states account for nearly 1/3 of the total U.S. population
  • Gross domestic product in these states is in the trillions, $6.8 trillion

Source: USA Facts

Which FAACT state has seen the greatest percentage increase since reopening? Arizona followed by Texas. Arizona went from less than 2,000 weekly infections before reopening to more than 11,000 as of June 17th. Texas saw its weekly infection rate rise from 3,412 before reopening to more than 16,000 as of June 17th.

Source: USA Facts

While FAANG stocks get most of the press, wise investors would prioritize tracking the rate of weekly infections in the FAACT states when trying to forecast the economic outlook and likely direction of the equity markets. Based on the current “hockey stick” increase in weekly infection rates currently occurring in the FAACT states, the prognosis for the economy is not good. What remains to be seen is:

  • Will be businesses in those states be forced to suspend or curtail operations?
  • Will Wall Street heed the serious warning signs coming from these key states or will they largely ignore them instead choosing to continue buying into much loved Wall Street tropes such as, “Don’t fight the Fed”?

While Wall Street can ignore reality for longer than a rational personal would expect, reality like death can’t be avoided forever and trying to run from reality, much like trying to run from death always ends the same – in disappointment.