Wednesday, December 29, 2021

Morning Note: The Latest on Covid -- And -- Our Propensities That "Define Finance"

While virologists we're definitely not, for obvious reasons we need to stay intimate with global developments around Covid-19.

While -- considering the curtailing/canceling of numerous New Year's celebrations around the globe, and the likes of Samsung adjusting production schedules due to an Omicron outbreak where its China facilities are located -- the latest surge is cause for concern, the sum of the available data is on-balance encouraging.

Here's from Bespoke Investment Group's coverage this morning:

Omicron: All data continues to point towards the massive surge in Omicron cases creating relatively low disease burdens relative to the historical relationship between COVID and severe disease (hospitalization and death). In addition to the evidence from Gauteng province specifically and South Africa generally, the earliest-hit populations, we now have enough data from the US and UK to confirm that this wave does not look like other prior waves. 

One qualitative example comes from the UK, where a few days ago a regional NHS operating trust CEO noted that while the number of people hospitalized with COVID was rising sharply, a huge proportion of those hospitalized were people who came to the hospital for another reason and tested positive while there. In other words, there are a lot of “incidental” hospitalizations right now in areas where Omicron is surging, but that doesn’t necessarily mean disease burden is high. Furthermore, while Omicron is out -competing Delta, seasonal increases in COVID driven by the Delta variant are creating very different outcomes and are overlaid with the Omicron data. 

What we can say with certainty is that national hospitalizations have plunged relative to cases. As shown at right, modeled new hospital admissions for the United States are running at 70% of what could be expected based on the level of cases; data lags mean this percentage only reflects the 7d average of new cases as-of the 26th. This is a good sign. 

Even in the Omicron epicenter of New York, the stock of hospitalized patients is at a record low relative to the recent caseload. While hospitalizations are rising, the combination of lower Omicron disease burden, “earned” immunity from prior COVID infection, and vaccinations are keeping the whole shock much more manageable. 

With any luck, future variants will look similar to Omicron: very transmissible, but ultimately not dangerous especially for immune systems that have been vaccinated and/or repeatedly exposed to the virus. 

Asian equities were mixed overnight, with 8 of the 16 markets we track closing lower.

Europe's struggling so far this morning, with all but 3 of the 19 bourses we follow in the red, as I type.

US major averages are mostly leaning lower: Dow up 67 points (0.19%), SP500 down 0.03%, SP500 Equal Weight up 0.22, Nasdaq 100 down 0.39%, Nasdaq Comp down 0.46%, Russell 2000 down 0.24%.

The VIX sits at 17.89, up 2.0%.

Oil futures are down 0.41%, gold's down 0.26%, silver's down 0.91%, copper futures are down 0.55% and the ag complex is up 0.66%.

The 10-year treasury is down (yield up) and the dollar is down 0.40%.

Led by ag futures, carbon credits, consumer staples stocks, utility stocks and Mexican equities -- but dragged by AMD (chip maker), uranium miners, ALB (lithium miner), MP (rare earth miner) and solar stocks -- our core allocation is down 0.09% to start the session.

"Human nature has no role to play in how subatomic particles interact with one another. Our propensities related to fear, euphoria, herding, and culture, however, virtually define finance."

--Alan Greenspan

Have a great day!

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