Daily Brief - Some good news to start the week (Dec 20, 2021)

It’s slowing down! Less than three weeks after it was first detected there, the Omicron spread appears to be peaking in South Africa. New infections are showing “early indications” of slowing down as hospital admissions also remain below previous waves, the country’s health minister said.

I am tired of reading about this

Mondays are already tough so it’s good to start with something upbeat. We know everyone is “so over this pandemic” but it’s also quite clear that markets remain in its grip. After a horrendous week that overwhelmed stocks with the news of record cases in New York, coupled with a determinedly hawkish Fed, the end could be near.

Oh, and we mean “the end” in a good way: the correction may be close to running its course.

Two things we (may) know about Omicron

It seems ludicrous to think about the end when the first cases just started appearing in the US a week ago. However, bear with us. The situation in South Africa is worth following as a paradigm for how quickly Omicron might spread through the population. Two things are notable.

One, the symptoms at least appear to be more benign. As the experts have cautioned, it’s much too early to compare the severity of this variant with the Delta. However, in the second week of the fourth wave in South Africa, hospitalisations were running at about 350 a day against about 20,000 confirmed new daily cases. This is in contrast to nearly 900 hospital admissions and about 4,500 new daily cases in the second week of the third wave, driven by the Delta Variant.

"The hospital admissions during Omicron, standing at 58 per 1,000 infections, are the lowest of the four COVID waves, and one-third of what we experienced during the delta surge," Ryan Noach, the CEO of the country’s largest insurer said in a presentation on Tuesday.

Two, as already apparent from New York data, the speed of this wave is dramatically faster.

The key to the future is the rate of change

Encouragingly, in recent days new cases and positive test rates appear to have turned a corner in Gauteng, the economic hub where South Africa’s first Omicron cases were seen. While cases are still rising rapidly in other provinces, Gauteng may have peaked with positive test rates that were as high as 35 per cent now on the decline.

If this holds, the entire wave will have gone from first detection to a peak in three weeks, blazingly fast and a testament to how easily it spreads.

Investors and markets, in an attempt to anticipate the lows and the highs, often respond to the rate of change. Therefore, metrics like the positivity rate - which has been doubling every three days in New York City - will come under a lot of scrutiny for signs that the peak is near.

Paraphrasing Churchill, it may not be the end. It may not be the beginning of the end. But it could be the end of the beginning.