Markets underwent a volatile session today on news that the WHO is monitoring a new covid variant detected in small numbers in South Africa called B.1.1.529. The new variant is purported to contain multiple mutations with increased antibody resistance and rattled markets on a thinly traded day with several of the cyclical & travel related parts of the market getting hit hardest.The development of rising covid cases is a risk to markets but the trend of the world economy recovering from covid is still intact even as new variants create speed bumps in the process. The Delta variant created a hiccup in the recovery earlier in the year but the economic risk ended up being minimal. With winter approaching I would guess that the world will continue its rolling two month cycles of rising and falling covid cases with a combination of antivirals and boosters eventually smoothing infections similar to the flu.
The WHO has said it will take weeks to understand how the new variant may impact transmission or react to vaccines. But for some perspective, South Africa still has very low vaccination rates with only 41% of the population receiving the jab. In most of the developed world vaccination rates are greater than 70%. Also, only ~ 80k tests per day are being administered in South Africa which means the sample size will need to be much larger before data is concrete. And while the new variant is worried to be more transmissible, death rates in South Africa are still very low which is encouraging . We’ll see if that holds in the coming weeks.
In short, while the new variants are a cause for concern and cases are likely to rise this winter, the World & markets have adapted to each new strain and grinded closer to recovery. We will monitor the developments of this new variant as more data becomes available.
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