Our entire repository of COVID charts is HERE.
A small study of vaccine efficacy in the UK found a booster dose provides ~70-75% protection against symptomatic infection. Effectiveness against severe disease, which is much more important, will be higher. But efficacy of the first two doses is worse (no percentage provided). The estimate reduces tail risk a little. Boosters are clearly important; rollout in the U.S. is progressing. 44% of those 65+ have received a booster.
The efficacy news doesn’t change the outlook for severe cases too much (outside of reducing tail risk). Deaths have been concentrated in older cohorts, but most of the hospitalizations in the Delta wave were 18-64 year-olds (older had better vaccine coverage). Vaccine coverage is worse into a possible Omicron wave. The hospitalization simulation we run through again below assumes the same susceptibility to severe infections as during Delta, when more older people were vaccinated. But don’t forget about therapeutics. This time we have new antivirals (paxlovid and molnupiravir) and antibody treatments (sotrovimab) that are all still believed to be effective against Omicron. Vaccines are not the only tool in fighting severe infections; therapeutics are important too.
Quick update on the UK… the incidence of Omicron is increasing. The government expects Omicron to be the dominant strand before Christmas. Case growth is rising, particularly in the younger cohorts. It’s early to draw conclusions from net hospitalizations.
Here’s a simulation of hospitalizations in the U.S. under a theoretical Omicron wave. It’s a very rough estimate because we make assumptions about transmissibility, severity, and vaccination efficacy that we don’t have data for. The range of hospitalizations under different severity assumptions is extreme. We don’t know, and that’s the point; the illustration helps explain the volatility in the 10yr and Recovery stocks. OK, now for the simulation. According to a Japanese study, Omicron is roughly 4 times more transmissible than delta. Let’s say we rerun the Delta wave but its 4x as bad and it starts right now. The assumptions here are that vaccine efficacy and reinfection risk are the same as they were during the Delta wave. We don’t bake in estimates of susceptibility because it implies too much false precision; we don’t know how many people have immunity from Delta infections (because we don’t know the test capture rate), we don’t have data about waning efficacy, and we don’t have clean data about booster efficacy. With those assumptions, case growth would obviously be extremely high, peaking at ~700k cases a day.
During the Delta wave, one new case was consistent with 0.65 people in the hospital.
After 1 week of data from South Africa, hospitalization data indicates Omicron is 0.2x as severe as Delta (using ratio of hospitalizations, advanced one week, to case growth). We know this is early and imperfect, but it’s the only data we have.
So, here are a number of different scenarios of hospitalizations under a theoretical Omicron wave (assuming 4x Delta transmissibility), ranging from as severe as Delta in the U.S. to 0.1x as severe. The grey line is 0.2x, the early indication of Omicron’s severity relative to Delta from South Africa. Assuming 4x transmissibility and 0.2x severity, hospitalizations would peak ~190k, above the winter wave peak of ~130k. One of the difficulties is we are starting from a higher level of hospitalizations than in previous waves. Bearish market calls rely on the green and orange lines – severity equal or 0.5x Delta. Early indications from South Africa would be much more benign for markets.
Most states are well below peak ICU usage hit during prior waves. Michigan is the lone state at its peak now. We include all the states we have data for in the chart below.
The term premium is at its lowest level since early 2020, when vaccines and treatments didn’t exist. Hospitalizations matter for the markets insofar as they lead to lockdowns and the economic consequences thereof. There are two points to keep in mind (in addition to how little is known when estimating hospitalizations): 1) we have new and better treatments, including therapeutics that are expected to work against omicron, and 2) political appetite for lockdowns is significantly less than 2020.
22V’s Washington Policy team believes that the odds of restrictions at a national level are low. President Biden relayed his belief that current measures are sufficient to deal with the new variant during his press conference after last week’s jobs report. Biden’s net disapproval rating is near its low; he is unlikely to embrace incredibly unpopular lockdowns.
Charts for every state and country we have data for are HERE.
