The first day of 2022 featured a somewhat awkward juxtaposition of headlines.
Stories documenting the biggest surge in COVID cases since the onset of the pandemic looked uncomfortable sharing space above the fold with articles touting one of the most remarkable runs in recorded history for the world’s most important risk asset benchmark.
By now, nearly everyone with even a passing interest in the evolution of our planet’s viral scourge is apprised of multiple studies suggesting the Omicron variant is more transmissible but less likely to cause severe disease. I’ve documented each of those studies. Booster shots help, although Sinovac’s apparent impotence is problematic given how many people rely on it.
Generally speaking, the Omicron question is this: When considered in conjunction with the still large absolute number of unvaccinated individuals and, relatedly, unboosted individuals, will the surge in case loads offset the strain’s reduced severity vis-à-vis the burden on national health care systems?
The US is now averaging 300,000 cases per day (figure below). On any given day, a spike near 500,000 is possible. Within weeks, some suggest the country could see as many as a million new infections over a given 24-hour reporting period.
Nearly a third of the US population has received one dose according to the CDC, while just 62% are counted as fully-vaccinated. Only 34% have received a booster. The vaccination data is reportedly bedeviled by miscounting. Deaths remain nowhere near peaks from prior waves, or at least not on average.
The official CDC data may soon be inadequate when it comes to measuring the overall case load. The figure (below) utilizes data from Biobot Analytics, which analyzes wastewater to assess the prevalence of the virus and thereby the nation’s underlying COVID-19 burden.
“During the Delta variant wave in the US, our partner communities witnessed increases in virus concentration in their wastewater data,” the company said, just days after Omicron began to dominate national news coverage.
“Although the data did not differentiate between the Alpha or Delta variants, it provided communities an immediate indication that cases were climbing,” the same blog post read, adding that “it remains critical to closely monitor wastewater data within the United States to track potential increased transmission rates due to Omicron.”
The Massachusetts Water Resources Authority reported results from samples taken three to seven times per week and analyzed by Biobot. The figure (below) includes samples submitted as recently as December 29.
As one highly educated individual put it this week, “Boston wastewater makes all the past waves seem almost flat — it’s hard to comprehend.”
Yes indeed. Also “hard to comprehend” is the performance of US equities in 2021, a year during which the S&P 500 notched 70 record closing highs.
If you round 2016’s gain up, the world’s risk asset benchmark par excellence has logged a double-digit gain in five of the last six years (figure below).
I scarcely need to recap what could could go wrong. Bloomberg’s Vildana Hajric captured it in just a few words: “Doubts creep in when superlatives pile up.”
What I would note (and I mention this at regular intervals), is that the financial crisis spawned a cottage industry in market agitprop, the central tenet of which was (and still is) that central banks are almost solely responsible for post-GFC gains in risk assets.
Unfortunately, an overwhelming majority of everyday investors lack the analytical skills to point out the inherent contradiction in that thesis. It’s almost a logical fallacy — an exercise in question-begging.
If you’re convinced that a cabal of policymakers with the capacity to conjure unlimited sums of money in an effort to levitate financial assets is determined to do just that, why would you not back up the proverbial truck and buy as many of those assets as you can possibly afford to buy?
A dozen years later, that simple, yet devastating, critique of the central bank bubble-bear thesis continues to elude scores of market participants. Maybe 2022 will be the year the house of cards finally collapses. But probably not.
So, if Omicron wreaks havoc on the US and global economies, is it reasonable to assume the Fed will ease up?
Hard to imagine the Fed will tighten in the midst of what seems to be happening. I recently read the small village of Xi’an China (population of 13 million people) is in total lockdown with reports of people placing grocery orders that 4 days later had still not been delivered.
It now appears that Omicron is little threat to vaccinated and boosted individuals, although they will spread the infection to others. The good news may be that Omicron increases the individual’s resistance to Delta infection.
At this stage of the pandemic it seems as though it may be time to live with the virus from behind a mask. Aside from leveling the curve to avoid overloading the hospitals, it seems inevitable that everyone will contract Omicron. If Omicron truly helps protect against Delta, all the better.
As far as the unvaccinated adults go, after a year of begging and cajoling them to get protected, society should be past caring if they live or die.
I know that I am.
H-Man, Covid and inflation seem to share Hemingway’s definition of bankruptcy which was mentioned in Barrons but only as to inflation — first it is gradual and then it is suddenly. it would appear Omicron may peak, according to some, in mid-January —- but inflation seems to have more gas in the engine.