Survey Shows Consumers “Panicked” About Delta Variant Suggesting Negative Shocks Are Transitory
Trends in USA COVID-19 cases are still distorted by holidays, but showing steady improvements…The surge and scourge of Delta-variant runs its course in specific states but the overall USA cases don’t necessarily capture this because other states are seeing a surge. And case data is distorted by the Labor Day impacts (missing data, true ups) and the book ends of Rosh Hashana and Yom Kippur, causing additional distortions. By the end of next week, data will be likely normalized.
– still, daily cases came in at 143,649
– this is down slightly from 150,611 same day last week
The best illustration of the “end date” of Delta variant is the continued downturn in cases in FL. Take a look at the case trends:
– FL has been in back since mid-August
– FL colleges are back in session
– FL continues to take the fewest mitigation steps
Cases are rolling over hard.
ACCINE SAFETY: Singapore study shows 0.13% of mRNA doses lead to suspected adverse events…
Singapore’s Health Ministry posted a comprehensive study of adverse effects from vaccinations. This report, released on Thursday, shows startlingly low adverse effects for mRNA vaccinations:
– 8.7 million doses administered
– 11,737 suspected adverse effects
– 0.13% of the doses
OK. For many people, this is viewed as 11,737 too many adverse effects. But considering that the risks of a severe outcome from a COVID-19 infection itself, one might need to consider that perspective.
Latest Destination Analysts survey shows many consumers “panicked” due to Delta, cancelling/ postponing trips
Since the start of the pandemic, one of our “go to” places to guage travel sentiment has been the work of DestinationAnalysts.com, a travel research firm (in SF). We like their work because they conduct regular surveys (n# > 1,500) and with history available, we can compare changes in sentiment over time.
Their latest survey really highlights the extent that US consumers panicked due to the Delta-variant surge:
– 59% travelers are concerned about Delta variant
– 27% cancelled trips due to Delta variant specifically
– 34% postponed trips due to Delta variant specifically
These are meaningful figures. That is, a lot of travel-related impacts have taken place due to Delta-variant surge. The fact that this turn down happened is not entirely a surprise. It has been well telegraphed and apparent either by anecdotes and by “soft surveys” and it is also showing up in company guidance — airlines cut guidance last week.
Consumer concern about Delta-variant seems like a panic…
Why do we think consumer concern about Delta is more “panic” than appropriate? There are several ways to contextualize this:
– “concern” about COVID-19 is at 64%, surging from 40% in June
– “concern” is same level it was in March 2021
– 179 million Americans are fully vaccinated as of Thursday
– 15 million fully vaccinated in March 2021
– shouldn’t fully vaccinated Americans be less concerned?
Think about this. For a fully vaccinated American, the concern about COVID-19 should be lower today than in February. After all, even if one can get infected (via breakthrough), the healthcare risk is 10X lower — so one should have far less concern today than in March 2021, if one is fully vaccinated:
– this survey implies that even fully vaccinated Americans are just as concerned about COVID-19 now vs March
– is this panic? or is it rationale?
STRATEGY: Travel-related stocks show that investors are even more “panicked” than consumers
In fact, take a look at the airline ETF JETS0.24% . We want to simply compare the price of the ETF now versus the last time consumers were this worried about COVID-19:
– we looked at the two dates of similar consumer “concern” – now vs late March 2021
– JETS ETF is 25% lower now than in March 2021
– Why are the airline stocks 25% LOWER?
This suggests investors are treating the impact on Delta-concerns as impacting long-term trajectories, rather than transitory.
– true, 27% cancelled travel plans
– is 25% lower appropriate because of short-term cancelled bookings?
– do we really think these are permanently cancelled plans? not to be rebooked?
WTI Oil arguing impact from Delta is transitory, not structural…
Looking outside of equities, the best evidence that Delta impact is likely transitory is the recovery in oil prices. Take a look below. You can see WTI is back to $72. In March, it was $60. So WTI oil has moved up smartly and looks to be breaking out of the recent consolidation.
…Buy Yom Kippur = Friday stocks should gain, despite “quad witching”
Finally, we are finally exiting the seasonal “sell Rosh Hashana, Buy Yom Kippur”. As you can see below, stocks have been sloppy during this period. And it has coincided with quad witching. Quad witching is the simultaneous expiration of:
– equity options
– index options
– equity single stock futures
– equity index futures
This is quarterly event and given the growing role of derivatives, could have a bigger impact on cash markets. In other words, next week, the dual overhangs of “Sell Rosh Hashana, Buy Yom Kippur” plus “quad witching” are behind us.
Figure: Way forward ➜ What changes after COVID-19
Per FSInsight
Figure: FSInsight Portfolio Strategy Summary – Relative to S&P 500
** Performance is calculated since strategy introduction, 1/10/2019
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