Risk sentiment was firm for a third session Thursday, as global stocks aimed for their best three-day advance in months.
The “peak rate of change” narrative still has merit, though. Or at least I think it does. If growth and earnings have peaked just as the Delta variant forces the wrong kind of inflections in virus curves, markets may struggle to reconcile the perception that the macro picture is gloomier at the margins with elevated valuations.
And yet, of the S&P 500 companies who’ve reported earnings, 85% have posted beats. Between that, still abundant liquidity and the loosest monetary policy on record, it can be difficult (on some days, anyway) to get behind any full-on bearish narratives.
On the COVID front, a piece in The New York Times suggested nations with “zero-infection ambitions” are now prone to abandoning the idea as mostly unattainable. “Increasingly, the mantra is the same: We have to learn to live with the virus,” Sui-Lee Wee wrote, adding that, “people are being encouraged to shift their pandemic perspective and focus on avoiding severe illness and death instead of infections, which are harder to avoid.”
The linked article quoted the head of the National Infection Prevention and Control Committee at the Health Ministry in Singapore, where “even the most diligent measures were not enough to prevent infection.” “You need to tell people: We’re going to get a lot of cases,” he said. “And that’s part of the plan — we have to let it go.”
The Times made it clear that not all officials are prepared to adopt a fatalistic approach — especially given how little scientists know about so-called “long COVID” and the possibility that giving up on containment measures could create more favorable conditions for new variants to emerge. But at least in wealthy nations where vaccination rates are reasonably high (and where effective vaccines are readily available to anyone who’s unvaccinated and decides to get inoculated), efforts to reduce the spread may ultimately be abandoned in favor of monitoring trends in hospitalizations and fatalities. That will be especially true if Pfizer and Moderna are able to develop booster shots targeted at the variants.
To be clear, I’m not qualified to express an “opinion” on the situation. Conventional wisdom has it that everyone is “entitled to their opinion.” But that simply isn’t true. If you don’t know what you’re talking about, you can’t properly have an “opinion.” Rand Paul learned that the hard way this week, when he was embarrassed by Anthony Fauci during a congressional hearing. The exchange went viral. No pun intended.
Although we seldom acknowledge it, the word “opinion” implies some bare minimum level of competence in the subject under discussion. The phrase “You’re entitled to your own opinion but not your own facts” is just a circuitous way of saying the same thing. I have no competence in medicine, so I can’t have an “opinion.” But, by virtue of being human, I do know something about human nature. And by virtue of being American, I know something about the misplaced sense of entitlement that goes along with being born into the middle-class in a rich country. Armed with that knowledge, I can confidently say that in my opinion, even the staunchest advocates of containment and the loudest champions of the science will eventually just say, “F–k it” in wealthy nations where medical care is readily available in the event of symptomatic illness.
Someone who was fully vaccinated with the mRNA shots this year and receives booster shots (assuming they’re developed and approved) for the variants later, won’t avoid crowds and human contact forever, no matter how bad the daily infection curve looks. I still think the virus has permanently altered consumption patterns to the extent it accelerated shifts that were already afoot (e.g., online shopping and streaming feature films). But modern humans in advanced nations are simply too accustomed to convenience to tolerate being put out forever, unless the chance of death is very high — even then, there’s no guarantee that everyone will be prudent.
For example, it’s already annoying when those notoriously unreliable card readers at the gas pump malfunction, forcing you to go inside to pay before you fill up your tank. The idea that someone whose card is declined at the pump but who doesn’t have a mask handy is going to get back in their vehicle, drive on fumes to a drug store, buy a package of masks, then drive back to the gas station so they can safely pay inside, is laughable. I suppose you could just pull your shirt collar up over your mouth and nose, but you get the point. And you can conjure any number of similar scenarios. I stopped wiping down my groceries with rubbing alcohol months ago, for instance.
That abandonment of caution will be all the more tempting if case curves continue to diverge from hospitalizations and deaths. Those divergences will also tempt market participants to adopt a flippant approach.
“One thing that may continue to lift the mood is the continued divergence between rising COVID cases and hospitalization or death rates, in countries where vaccination levels are high,” SocGen’s Kit Juckes wrote Thursday, presenting the charts (below), which use a 20-day lag between cases and deaths, and a 10-day lag between hospitalization and death.
One would generally expect the divergences to be even wider in nations where the more effective vaccines are dominant.
And yet, all of the above leaves largely untouched the “horrifying injustice” described on Wednesday by the WHO’s Tedros Adhanom Ghebreyesus, who reminded the world that 75% of vaccines have been administered in just 10 countries.
“Much of the developing world is also still facing rising infections, giving the virus a greater opportunity to rapidly replicate, which then increases the risks of more mutations and spread,” the Times article cited above said, noting that “only 1% of people in low-income countries have received a vaccine dose.”
“This is a double-edged sword,” SocGen’s Juckes remarked, of the divergence between case rates and severe illness in the UK. “It screams at the developed economies to step up efforts to help get the developing world vaccinated.”