Our entire repository of COVID charts is HERE.
We don’t have any special information about Omicron. Forecasts of case growth are largely guesses right now. We are all in wait-and-see mode. Our friend Noah Smith wrote an excellent summary piece on what we do know about Omicron. Check it out HERE. Instead, we will focus on what we think matters most: severity, policy reactions, activity, and market impacts. As far as severity is concerned, Omicron cases in South Africa have (so far) been milder than delta. HC-focused investors we talk to seem to agree with this idea. Granted, we will need more time to understand severity, but if Omicron is indeed milder, the economic and market effect should be minimal. Focus on deaths and hospitalizations, not case growth. And for that, we have to wait. So, equities, and recovery stocks in particular, will be beholden to headlines until we have data. Our Recovery Portfolio is significantly underperforming again today despite the market rally. Only 4% of the portfolio constituents have increased WoW. The overall market is insulated by vaccines and treatments, but Omicron will impact on internals. Short-term correlations have dropped further leaving stock picking a more important source of alpha.
Investors have to contend with policy responses to Omicron. Travel restrictions are being imposed globally. The Netherlands tightened its partial lockdown – now most venues have to close at 5 pm. German officials are meeting Tuesday to discuss toughening restrictions. The list goes on in but with varying degrees of severity. Oxford’s stringency indices will help objectively score how intense restrictions are. Rules in the hardest-hit European countries are increasing but still below early 2021 levels.
Mobility metrics will help gauge activity regardless of government mandates.
Vaccines and treatments will likely help keep activity elevated. Moderna Chief Medical Officer Paul Burton thinks vaccinated people should still be protected. Simultaneously, Pfizer-BioNTech and Moderna will be prepared to have a new version of their vaccines within 100 days if necessary. Pfizer CEO Albert Bourla believes Pfizer’s COVID treatment pill will still be effective because it was designed with the likelihood of variants in mind. Boosters continue to be rolled out globally to combat the recent spike in case growth. Ideally, they will help against Omicron too.
It’s worth noting that vaccine efficacy was fading. The infection rate of vaccinated people in the United States started increasing relative to unvaccinated people in September. In other words, vaccinated people started getting sick at a rate closer to that of the unvaccinated. On the bright side, 42% of those 65+ (the most vulnerable to serious illness) have received a booster. It is also important to note that the hospitalization rate for vaccinated people stayed extremely low through the end of September (although hospitalizations lag case growth). Both are a good sign for protection against severe cases.
Investors seem to agree on ‘wait and see.’ The S&P is up +1.6% today and the 10yr is up +5bps to 1.53. Interestingly, 1-month skew in the S&P has not spiked in response to Omicron concerns. In other words, investors are not paying up for hedges relative to upside like they were in previous COVID waves.
Omicron has been identified in South Africa, Canada, the Netherlands, Australia, Denmark, Botswana, Belgium, Germany, Israel, Italy, Hong Kong and the Czech Republic. Global case growth is worst in Europe (still). Watch out for a possible Thanksgiving data lag in the US.
Charts for every state and country we have data for are HERE.
