Last Monday there was a strong correction in the american market that drove the Dow Jones and S&P 500 down by 2.1% 1.6% respectively motivated by the uncertainty of the new delta variant of the coronavirus. But investors continue to ignore it, according to John Hyatt on Nasdaq.com
“The appearance of this more highly transmissible Delta variant called into question the sustainability of this reopening and the recovery,” he said. Candice Bangsund, Portfolio Manager at Fiera Capital, to The Wall Street Journal after Monday’s session ended.
Delta’s spread is concerning: 83% of the new Covid-19 cases in the US are now Delta infections. The most transmissible variant, combined with widespread vacillation over vaccines, has led to new cases of Covid in the US increase 55% during the last week. With the variant spreading throughout the rest of the world, especially in the least vaccinated countries of Asia, Latin America and Africa, it seems increasingly likely that Covid-19 will persist in the coming years.
However, despite this bleak forecast, US stock market investors changed course in the following days. On Tuesday, markets regained lost ground, with the Dow rising 1.6% and the S&P rising 1.5%. On Wednesday, stocks were stable. It was as if Monday’s slide, powered by Delta, had never happened.
What explains the change in sentiment?
On the one hand, investors may be warning to a point that many epidemiologists and virologists have been saying since the pandemic began, long before Delta emerged as the dominant strain: that Covid-19 is likely to become endemic. Governments around the world are preparing for this reality. Many have begun encouraging their citizens to revert to pre-pandemic behaviors as restrictions on the economy, such as mandatory masking and meeting limitations, are loosened. “Increasingly, the mantra is the same,” wrote the New York Times this week. “We have to learn to live with the virus.”
Two, despite feelings of nervousness and déjà vu after a weekend of headlines about rising coronavirus cases, investors may have calmed down and reminded themselves that vaccines are doing their job. and protecting against serious diseases, even in cases of breakthrough infections and the Delta variant. More than 99% of recent deaths occurred among the unvaccinated and more than 97% of hospitalizations among the unvaccinated, according to a recent comment by the Dr. Anthony Fauci and CDC Director Dr. Rochelle Walensky. Undoubtedly, hesitancy in the US and the difficulty of global inoculation remain major obstacles to a post-pandemic economy and one full recovery. But with vaccines developed and now being rolled out (albeit at a glacial pace globally), those hurdles are not insurmountable forever.
Three, and perhaps most importantly, economic data shows that the United States economy is already emerging beyond pandemic conditions. For example, unemployment data published this week show that in July, the number of Americans who received unemployment payments it fell to the lowest amount since the start of the pandemic. The retail sales have increased in the last three months. Even concerns about inflation they are somewhat reassuring in the sense that supply is being recalibrated to meet growing demand from across the economy.
“In short, US investors should feel good about where things are, even with Delta. The markets are reflecting that ”, concludes Hyatt.