Trading covid cycles

November 24, 202111 Comments

Can you make money off Covid trends? Today, I’d like to examine how we might participate in Covid trending trades. We’ll look at cyclical Covid patterns that can give us a heads-up for sector rotations, and we’ll look at a couple of specific sectors to pay attention to during those cycles. Of note: every once in a while I write a blog that could be called more “significant” than others. This is one of those blogs. Pay attention, class! I know it’s a bit long…. But this is trading strategy that could be game-changer for your portfolio.


What to buy during the “Covid-on/ Covid-off cycles”

To start, its pretty obvious that the big drug companies that issue Covid vaccinations profit from Covid – even those who originally decided to forgo their profits. I cannot imagine that there hasn’t been at least some lobbying influence by these firms to increase the saturation of their products.  Recall the original banter that 70% assimilation would control the virus – then 80% – and now 90%? Witness the new vaccine passports… and other personal restrictions to “encourage” adherence. And now – vaccines for kids. And don’t dismiss the likely upcoming campaigns for booster shots.

Anyone who doesn’t see the vested interest by PFE, MRNA, JNJ, AZ, etc to influence new usage recommendations is not paying attention. Buying shares of these firms are the “obvious” way of playing the Covid trends. But….Because drug producers are the obvious trade, its not likely the most opportunistic trade.

Thankfully, the drug companies are not the only way to play Covid.

Another way to play Covid is via the “stay inside” trades. When Covid makes a new wave, guess who wins? Amazon, Google, Netflix, Apple – to name a few. Smaller capped, more risky stocks like Zoom or Peloton might catch a bid as well – although these stocks are so overvalued that they are not my preferred trade. Overall – think indoor delivery, work at home, and indoor entertainment. Or, for ETF investors, think technology ETF’s or the NASDAQ, which contains the mixed bag including FAANGS and Biotech.

Timing AND rotation is the name of this game. We want to move INTO the Covid-on sectors noted above (Technology, FAANGs, Stay-inside) at the cusp of a new breakout. We want to move OUT of those sectors and INTO Covid-off sectors like value, reflation, travel, and “go outside” stocks as the wave dissipates. Not to suggest we completely rotate entire portfolios in and out on this trade—but there is a case for overweighting / underweighting these sectors according the Covid cycle.

Media is a leading and coincident indicator for Covid trends

So – how do we determine the timing on trading the next Covid wave? There is a tradable pattern here for those who are listening. First, the media is your best friend on Covid´s relationship to risk and markets. They consistently embellish the risks of each wave to drive click-bait.

Think of this – in a world without Trump – what is the politically left leaning media exec supposed to do to attract eyeballs? Remember – its all about the headlines these days. Media is online, not on paper anymore. “Free” news earns its profits by advertising. Profits are earned by the “click”. The content of the article is less meaningful than the headline.  A shocking headline attracts your computer mouse like a moth to the flame. The best source of shock-headline clickbait today is Covid. “Cases on the rise”, “New variant strikes”, “Run, hide, be afraid!”. So, you want to be overweight on the Covid-on trade as the media begins to ramp up the talk about new cases, variants, and reasons to be afraid. You want to be underweight that trade and into the Covid-off sectors when this news peaks and abates.

Below is a Google Trend chart on Covid case enquiries. If you read my new book, Smart Money/ Dumb Money,  you will recall that this tool is a contrarian indicator that will help you spot crowded trades (tops) in high-visibility stocks and sectors. I’ve referred to Bitcoin, Tesla, Cannabis on this blog while using this tool. We can use this same tool to spot peaks on Covid case searches and see if they line up with technology, stay-inside, or drug company movements. Here’s the Google chart – note the arrows showing peak enquires, which signifies the peak in media scare-headlines:

Here’s the NASDAQ chart. Note the initial Covid breakout / Google enquiry peak and market selloff in March of 2020. After that, Google enquires on Covid cases spike (chart above) where the Nasdaq is about to correct – August 2020, Sept 2020 and January 2021:

Weather is a leading indicator for Covid patterns

We can also use some weather patterns to look at Covid patterns. As much as the government wants you to buy into the “more is better” vaccine, lockdowns, and mask mandates to control the disease; there is a strong pattern of evidence that points to Covid patterns surrounding weather. Covid, like many viruses, is often called an “inside” disease. So, when do people stay inside? Well, here in the Great White North (eg – New York, or Ontario), people stay indoors in the winter. We bolt from our cars to buildings to escape the ravages of bitter weather. And that’s when Covid trends rise. Note the Covid case chart seasonal patterns for Ontario below. Rising into winter, falling into summer.

Here’s the Covid case chart for New York. Similar pattern:

I have a strong connection to Florida –I spend a fair amount of time there most years. I have learned that the pattern of residents in the hot states like FL and TX are in their “stay inside” cycle during their oppressively hot summers. Its ironically too cold here to go outside in the winter (November – April), but its just right to go outside in Florida. So everyone’s outside in the hot states to enjoy the moderate but comfortable weather during our winter months.

But the tide changes in the summer. That’s when northern states and Canadians go outside and enjoy the pleasant weather. But… that’s also when residents of hot climate states stay inside. They bolt from their cars to buildings to escape 40 degree Celsius temps PLUS humidity! Think of the Covid case cycles in the two cold climate epicenters of disease last winter (Ontario and New York, which both locked down last winter). Florida and Texas had drastically falling cases last winter (I know – I was there).  But then, the patterns in the hot states reversed from falling cases in the winter – to the rise of a new variant during their stay-indoors period this summer. This reversal of fortune ain’t likely a coincidence. Here’s the Florida Covid case chart:

Note the climbing cases over the cold- climate states in the winter above, and the opposing trends in Florida. In other words, its less about government policies, mandates and lockdowns than it is about the weather when it comes to Covid cycles. The takeaway here is that when we are watching for a Covid positive trading opportunity in the technology/Nasdaq/ stay-inside trade, we should be cognizant of weather patterns. Winter is a bigger factor for most of North America than it is for the smaller region of hot states. And winter is good for Covid, meaning its good for stay-inside stocks!

One last important leading indicator

Finally, there is a leading indicator for North American Covid cycles that extend beyond media headlines and weather patterns. The chart below, courtesy of BearTraps, shows us that European Covid cases can lead the US patterns. Notice the EU waves (green line) consistently lead the U.S. (orange line). Each green peak (Europe) was followed by an orange U.S. peak.

This applies to currencies as well as stocks. To quote Larry McDonald’s observations:  “In early April 2021, as the EU cases climaxed and the Euro touched 1.17 (dollar top below left – in blue) – cases in Europe touched nearly 400 per day, per mm population on a 7-day average in Q2 2021. A few months later, U.S. cases followed (orange) touching 500 per day, per mm population on a 7-day average, the Euro surged, dollar weakened, by May 2021 the Euro was 1.22. Clearly, this is the primary engine BEHIND the growth vs. value swings.”



We have the perfect setup for a potential rally this winter on the technology, entertainment, online shopping, drug makers and possibly other stay-inside sectors. We have:

  1. Normal seasonal patterns for these sectors to perform in the winter.
  2. Cold weather coming to most of North America that enhances virus cases  – we’re already seeing signs of this in Ontario and other areas as “flu season” arrives.
  3. We have a massive breakout in Europe that has proven to be a lead-in for cases in North America.
  4. We have a media starved for click-bait headlines. They will joyfully latch on to as much negative Covid news as they can scare you, and the markets with.

The bottom line: while I hold true to the inflation trade we’ve been positioning for over a year now, there is ample evidence to suggest moving at least some portfolio allocation into the “Covid positive” sectors may be a profitable move this winter. We’ve made a few moves in this direction in the ValueTrend Equity Platforms. Count on a barrage of profitable Covid fearmongering click-bait headlines coming right at you soon! Unless Trump makes a comeback. You never know.









  • Interesting insights Keith.
    Would this rotation also apply to stores like Canadian Tire, which seemed to thrive during the pandemic? Sports stores that sell outdoor winter equipment? Or is this sector still overvalued from the previous run up of stocks like Peloton that you mentioned in your blog?

    • Yes–any business who can benefit from covid fears and restrictions might catch a bid in the next wave.

  • Keith….do you have any insights into how the devastation on the West Coast (and now East ) might affect the Canadian Market? So much public infrastructure is destroyed which will need rebuilding and improvement. The personal property losses ( Insurance companies?) are mounting and will need addressing as well. Then there is the matter of increased taxes, across the board, to pay for all of this.

    Any thoughts on near term implications for Canadian investors?

    • Insurance costs on such disasters are usually spread throughout many firms –its called re-insurance. So its hard to say if any specific insurance stocks would be negatively impacted. On the cleanup side, who knows who gets the contracts (well, you know its going to be Liberal-supporting firms, likely based in PQ!!!)

  • Hi Keith,
    Anyone who listened to you and bought some of those stay at home stocks will be happy today with the rally in those stocks!

    Are you buying or selling oil with the threat of this new variant that could potentially be vaccine resistant?

    • We hold our oil — as our one year view is for higher prices. This Biden move to uncap the reserves is just that–reserves. They will run out and he will be back to square one. Perhaps, when campaigning against oil & threatening to phase out the OPEC producers production (not exactly inspiring cooperation by them, knowing this is the guy who wants to fire them from their jobs, so to speak), shutting down the Canadian pipeline that would deliver energy products, and capping the wells/ shale production in the USA, he might have thought that these moves were a tad premature. The nation and world depends on carbon energy, and we are years away from the green transition. Must be his old age dementia that failed to inform him on this reality.
      And yes, the headlines have begun re COVID. Click bait fodder, galore!

  • Nice call on Covid… I know you go to Florida, not sure you been to Africa in the last 24 hrs. Google search NO1 – I think its a bit of media hype (ie hard to believe that over night this problem came around – – ), Biontech or Moderna ?- whats your preference- charts are similar, more momentum with Btech- hate to be a day trader, but I think that’s where we are at –

    • My timing on the blog was ironically close to the trigger point–I actually expected the media hype to slowly grow. Nope…foot on the floor of the clickbait accelerator! Africa #1- imagine that!
      I can’t advise you on which individual stock to buy – but you have the idea right.
      Run! Hide! Be afraid!
      This feels like Deja vu. Only because it is!

  • I haven’t noticed too much peak of the click bait covid headlines. They love putting this stuff out

    • Dave if you watch the trends on Google, you will note that enquiries on hot topics like COVID or TSLA or marijuana will build over a period of weeks to a couple of months. So we are not near the peak enquiry point on covid searches–given that, being a winter disease, we are likely in for more noise in the coming weeks and months before it peaks. So the opportiunity to trade is a solid one- you can trade the “inside” stocks with a month or two or three time horizon.


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