Stocks are suddenly looking risky on CDC newsThe headline: vaccinated people are getting and spreading Delta
This afternoon the CDC announced that a Delta variant outbreak in Massachusetts infected a lot of vaccinated people. The vaccines provided protection against death and hospitalization, but less-than-expected protection against infection and transmission. The disturbing data helps me make sense of reports that over 80 vaccinated people (most of them over the age of 60) died of Covid in Massachusetts over the last couple months, an anomaly in the nationwide data.
Possible winners: vaccine-makers and ecommerce
The report probably bodes well for Moderna and Pfizer, which have been pushing the FDA to approve a third booster shot. Trial data shows that a third shot quintuples antibody counts and may provide additional protection. The FDA has been reluctant to approve a third shot, because it would reduce the availability of first and second shots for the rest of the world. But I'd say that the odds of a third shot getting emergency approval for use in patients over 60 just increased sharply. Ecommerce ETFs like IBUY and KWEB might also outperform for a while as people hunker down again.
Possible losers: everything else
The rest of the stock market is now at real risk, however, as Delta spreads and other states experience outbreaks like we've seen in Massachusetts. The US is about three weeks behind the UK in the spread of Delta, so my guess is we see a sharp increase in new cases for the next couple weeks, and then a peak around August 10. I'd put good odds on a selloff in the next week or two as the numbers worsen and people get pessimistic.
I'm not going short; just taking a break
There are some bullish factors here, so I'm just trimming my holdings, not going full short. Congress is about to pass a trillion-dollar infrastructure bill, and weakening economic data suggests that the Fed will keep rates low and hold off on tapering for the forseeable future. We're also seeing some dollar weakness, which could drive traders out of cash and into equities. I'll probably hold onto my miner stocks as a US dollar hedge. Other than that, I've mostly sold my stocks and will take a little break as we see happens with Delta. Trade safe!
