Broadly speaking, at least in the US and other developed markets, the COVID-19 picture has improved tremendously over the past year or so. In early to mid-2020, the global pandemic was at its fiercest, ravaging nearly every corner of the world in swift, frightening fashion. Infection rates and death tolls were rising rapidly, many economies were locked down and at a virtual standstill, and progress toward safe, effective vaccines was slow and halting at best. There was still much we still didn’t know about our deadly foe.

Fast forward to July 2021: Multiple vaccines have been approved for use and successfully administered to millions of people worldwide this year, bringing the global case-count, hospitalization, and fatality numbers down dramatically. Many economies have fully or mostly reopened and are growing at a strong clip as they rebound from the COVID shock. In short, despite some ongoing trouble spots, the developed world is on a path to recovery from the unprecedented health and economic crisis.

But not all of the news is good. The pandemic continues to wreak havoc in many emerging markets. And even in developed markets, it has experienced somewhat of a resurgence of late, as the so-called “Delta variant” — a dangerous mutation of the virus that causes COVID-19 — has spread across the world, having been found in more than 80 countries since it was first identified in India back in December 2020.

The Delta variant, COVID vaccines, etc.

The Delta variant is more worrisome than prior COVID variants due to the combination of its higher transmissibility and its potential ability to evade vaccine-induced immunity. Of those two attributes, ease of transmissibility is the greater concern: The Delta variant is roughly 60% more transmissible than the Alpha variant from the UK and 2 – 3x more so than the original COVID strain. On the other hand, the Delta variant’s ability to evade immunity seems relatively modest, especially compared to the Beta variant from South Africa.1

By and large, vaccine efficacy appears to be holding up well against the Delta variant. Recent UK data show an 88% efficacy rate for the Pfizer vaccine, while Israeli data indicate only 64% efficacy. We have yet to see details for the latter figure, but Pfizer has suggested that the lower efficacy may stem from infections in people who were vaccinated early this year and whose vaccine-induced immunity has decreased six months later. If that is accurate, it would lend credence to the argument for a third (“booster”) dose of the vaccine six months after the first two doses.

At this point, however, the official stance maintained by both the FDA and CDC is that there is no evidence supporting the need for booster shots. That could change going forward, in which case there would be several key questions regarding the availability and administration of boosters: Who should receive them, how many doses, and how frequently? As with the first two doses of the vaccine, the elderly and immune-compromised would likely be prioritized over younger, healthier individuals.

In any event, it is important to stress that the existing two-dose vaccine regimens have proven highly effective in preventing severe COVID infections and related hospitalizations.

Risks to watch

In my view, the biggest risk to keeping global economies open and growing lies in uneven vaccine access and adoption rates across countries. Nations such as the US, UK, and Israel that have been able to fully vaccinate around 50% or more of their populations have seen their case counts decline significantly as a result. By contrast, in some emerging markets, less than 20% of the population is fully vaccinated, allowing the highly transmissible Delta variant to drive up infection rates and threaten economic reopening. Even within the US, the percentage of the population that is fully vaccinated ranges from over 60% in the Northeast down to about 33% in some Southern states, which have had an uptick in COVID cases and hospitalizations.2

The limited access to and uptake of the vaccines in some geographies could provide breeding grounds for the virus to further mutate into additional variants. The possible emergence of new variants that might resist or elude vaccine protection and set back economic reopenings cannot be entirely ruled out. This tail risk may not be reflected in current asset prices and bears close watching in the months ahead.

1. The American Society for Microbiology, “How Dangerous Is the Delta Variant (B.1.617.2)?,” July 30, 2021.

2. Johns Hopkins University & Medicine, “Understanding Vaccination Progress,” July 31, 2021.

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