‘Living With It’: Record Stocks, Record COVID

It’s an odd pairing. Record high equities and record high COVID cases, I mean.

That’s not to say we haven’t seen something like it before. US stocks have, after all, notched the second most all-time highs for any calendar year on record in 2021, a year which also brought us the Delta variant and all the associated death and suffering. (Remember India’s bout with Delta? It was a truly macabre affair.)

For the better part of the pandemic era, though, we’ve been conditioned to associate the ebb and flow of the virus with the waxing and waning of risk appetite and market sentiment. This week, the world logged more than 1.4 million new cases in a single day. That was a record. And not by a close margin. The seven-day average also hit a new high at more than 840,000 (figure below).

Why aren’t we more worried? Well, that depends on your definition of “we.” Some people are palpably concerned.

But, for market participants, the sense of panic that set in following the Thanksgiving holiday in the US quickly abated as evidence mounted that between vaccines, therapeutics and a potentially less severe strain, the latest (and largest) wave presented a different kind of threat — the risk of overrun hospitals remains, but death on the scale seen during prior waves seems less likely. Indeed, the seven-day average of rolling COVID-related deaths globally is near the lowest levels since the onset of last year’s winter wave. That’s consistent with the US experience — so far.

There was still more evidence Tuesday to support the notion that Omicron may crowd out and otherwise mute Delta, an outcome many market bulls cited as a reason to remain constructive on risk assets.

As ever, I’m cautious when it comes to paraphrasing or otherwise editorializing around research that has no overlap with anything I’ve ever studied at the post-graduate level. With that in mind, the following paragraph is verbatim from a new study by a team of South African scientists led by Alex Sigal a faculty member at the Africa Health Research Institute and associate professor at the University of KwaZulu-Natal:

Omicron has been shown to be highly transmissible and have extensive evasion of neutralizing antibody immunity elicited by vaccination and previous SARS-CoV-2 infection. Omicron infections are rapidly expanding worldwide often in the face of high levels of Delta infections. Here we characterized developing immunity to Omicron and investigated whether neutralizing immunity elicited by Omicron also enhances neutralizing immunity of the Delta variant. We enrolled both previously vaccinated and unvaccinated individuals who were infected with SARS-CoV-2 in the Omicron infection wave in South Africa soon after symptom onset. We then measured their ability to neutralize both Omicron and Delta virus at enrollment versus a median of 14 days after enrollment. Neutralization of Omicron increased 14-fold over this time, showing a developing antibody response to the variant. Importantly, there was an enhancement of Delta virus neutralization, which increased 4.4-fold. The increase in Delta variant neutralization in individuals infected with Omicron may result in decreased ability of Delta to re-infect those individuals. Along with emerging data indicating that Omicron, at this time in the pandemic, is less pathogenic than Delta, such an outcome may have positive implications in terms of decreasing the Covid-19 burden of severe disease.

You can read more here, but that’s pretty straightforward, even for the layperson. And it appears to be relatively good news.

Sigal elaborated in a series of social media posts.

“The increase neutralizing immunity against Omicron was expected — that’s the virus these individuals were infected with,” he said. “However, we also saw that the same people — especially those who were vaccinated — developed enhanced immunity to the Delta variant,” Sigal added, on the way to suggesting that if Omicron “help[s] push Delta out… the disruption COVID-19 has caused in our lives may become less.”

Of course, for now, the disruptions continue. Headlines were awash Tuesday with news of new restrictions and containment protocols.

Coming full circle, anyone glued to a monitor (instead of their living room flatscreen) was also bombarded with headlines touting a burgeoning “Santa Claus rally.”

“Against a backdrop of rising COVID cases and record inflation, the market’s move higher is notable, especially as it’s happening in a week where more people are sinking into their couches than focusing on the market,” Goldman wrote, adding that although “recent data around the virus remains a mixed bag, a broader arsenal of treatments — both vaccines and therapeutic approaches — are essential for ‘living with the virus,’ and may be bolstering the market.”