Thursday, May 6, 2021
New Cases Surge
Even as an unprecedented global vaccine rollout is underway the daily number of new COVID-19 cases reported (measured by the 7-day moving average) recently passed 1.25 million for the first time. The number of daily global cases has escalated rapidly, from a trough of under 500,000 in mid-February, driven by a devastating second wave of infections in India as well as increases in several other developing economies.
“A successful domestic vaccination program has so far largely inoculated the US from participating in the most recent global wave of COVID-19 cases,” said LPL Financial Equity Strategist Jeffrey Buchbinder. “Especially in developing economies local governments are racing to deliver vaccines before new variants can take hold.”
As shown in the LPL Chart of the Day, the number of new daily COVID-19 cases in India is 46% of the global total (up from just 5% in mid-March), but the US proportion is at its lowest level (6%) since the start of the pandemic.
Relative to its population, the outbreak in India (population 1.37 billion) is smaller than the third wave in the United States that peaked in January. At that time, the U.S. was reporting 116 new COVID-19 cases per day per 10,000 people, and even though India’s rate has climbed rapidly it is still around 42 new cases per day per 10,000 people. However, India has suffered immensely from persistent underinvestment in its heath systems (spending just 3.6% of GDP on heathcare compared to 9% in Brazil and 17% in the US). Given current shortages of oxygen and hospital beds in India, we at LPL sincerely hope that this rate does not escalate further.
Race To Herd Immunity
Herd immunity against COVID-19 remains the ultimate aim of government vaccination programs. Different countries are due to reach this milestone at different stages due to differing speeds of vaccine rollouts. Herd immunity has been suggested by immunologists to be around 75% of the population vaccinated or with COVID-19 antibodies but estimates range from 65% to 90%.
As shown in the chart below, at its current rate of vaccinations, 75% of the U.S. population could be vaccinated within 4 months; but that may not be achievable based on the experience of Israel. Israel has fully vaccinated 58% of its population, which appears to be near a ceiling. The pace of vaccinations there has dropped to a level such that at the current rate it would take another 11 months to get to 75% vaccinated.
India and Japan are both seriously lagging on their vaccination programs. Based on current rates it would take around 3 years for each of those countries to fully vaccinate 75% of their populations. Globally just 3.7% of the population is fully vaccinated as many developing countries continue to struggle to access vaccines. To date, the wealthiest 27 countries have administered 36% of vaccines but only have 10% of the world’s population.
This immunity data does not include people who have COVID-19 antibodies after recovering from the virus, estimated by the American Red Cross based on blood donations to be over 20% of the U.S. population. As such, to get to a combined immunity level of 75% around 55% of Americans would need to be vaccinated (slightly less than vaccination rate that Isreal has achieved).
While new vaccine-resistant variants remain a risk, countries that have been successful in the deployment of COVID-19 vaccines could see more of a tailwind for their economies and markets. We still favor domestic equities over developed international equities, but the gap is narrowing. The COVID-19 situation in emerging market economies is mixed, with India and parts of Latin America struggling, but we expect economic growth across Asia and attractive valuations to provide support for investments in these regions.
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