COVID-19 Update
The news is very similar to last week - case counts rising in several regions, but the fatality rate either remains low or continues to decline.

Data out of John’s Hopkins highlights (or lowlights) the U.S. struggle with convincing the vaccine reluctant to get pricked. States in which the vaccination rate is below 40% are seeing caseloads (mainly the so called “delta variant”) at a rate of 7.5/100,000 people, whereas states in which the vaccination rate is above 60% are seeing rates of 2.5/100,000 people. There is a clear geographical split - South vs. Northeast and West - between these states as well as a political divide - red vs. blue.

Delta is now the dominant strain in most regions and estimates have the R-naught - the number of people each infected person infects - at between 5 and 8, which is well above the original strain, which was closer to 2.5.

The worrisome part about an R-naught this high is that even with vaccine effectiveness of 90%, a combination of vaccine reluctance and high transmissibility may mean that herd immunity to COVID-19 will be very difficult to achieve.

Not to get too “mathy”, but the rough equation for herd immunity as laid out by the Euro Surveillance, which is a bunch of mathematicians that study infectious diseases, is one minus the inverse of the R-naught (in this case 1/6.5 if we take the midpoint of 5 and 8) divided by the effectiveness of the vaccine (in this case, let’s assume 90%). This works out to ~94% needing to be vaccinated to achieve herd immunity. In contrast, if we took the original strain of COVID and an R-naught of 2.5, herd immunity would have been achieved at ~67%. Now, it is important to note that this does not factor in natural immunity gained by those who have already been exposed to COVID and likely have some natural immunity as a result. Thus, 94% is probably an overstatement, but it better frames the challenge that we face to ultimately move past COVID.

What does this mean? Absent an even more effective vaccine or widespread adoption well beyond current levels, it means we are likely to be living with COVID for the foreseeable future. It also likely means that we will need annual boosters for existing vaccines, but that those who have been vaccinated and are getting their annual boosters should be fine. It also likely means that we are going to be living with low interest rates and stimulus for some time to come, which as we have discussed numerous times in the past is generally good for stocks.

As for Canada, we remain on the right track with case counts continuing to decline:

With the vaccination rate continuing to rise and a much lower vaccine-reluctance rate than the U.S., Canada seems to be on a much better path.

Market Update

A fairly quiet week with the TSX bobbing back and forth over either side of 20,000. We have continued to see a shift from value back to growth stocks as the so called “inflation trade” has faded a bit over the past couple of months. The rise of delta has probably played some role in this shift as the so called “stay at home” stocks have once again taken the lead over those stocks tied to reopening of the economy.