The Implications of The Delta Variant

It is difficult to accurately compare the different studies on vaccine effectiveness vs delta. The numbers in these vary according to the country, the time period and whether they only have or mainly have delta infections. However, the following conclusions can be drawn:

Initially the most effective of the three main vaccines seem to be in this order: Moderna, Pfizer and AstraZeneca. Effectiveness declines over time with Moderna once again seeming the longest lasting and Pfizer protection declining faster than AstraZeneca. Data suggest the Chinese vaccine(s) are less efficacious against delta. All western vaccines have been effective at preventing serious illness, but it isn’t clear if this will persist over time.

The Jenkins study from Sydney University has found: Delta has altered the spike configuration and as a result can infect more readily and cause more severe disease. There is a very high viral load and hence it is more contagious in the early days. Delta prefers aerosol transmission.

The economic implications seem to be this:

Delta will encourage consumer caution, already visible in US consumer sentiment readings, restaurant bookings, air travel and hotel occupancy. Growth rates will be lower than anticipated and so demand driven inflation worries should ease, at least over the shorter term.

Overall, the economic recovery is unlikely to go into reverse given the still reasonable vaccine effectiveness and a greater reluctance by governments to reimpose lockdowns although localised measures are possible.

The most recent Fed minutes and comments by Fed members were more hawkish than expected re tapering the US economic news has subsequently been softer. This may be acknowledged at Jackson Hole by Jay Powell so these fears may subside.

The above scenario would favour growth styles over value or cyclicals.     

Strategy Team IRC 22.08.21