The South African variant virus (501.V2) is not the immediate threat to the United States as the UK variant virus (B117). But 501.V2 has the potential to create a far more powerful narrative – vaccine resistance – that can have a greater market impact than the more pressing issues of B117.
More and more, I think the variant viruses create a tradeable event for markets.
The spread of B117 in a Covid-fatigued country like the US is a profoundly deflationary, risk-off, dollar higher, flight to safety event in real-world.
Does it matter to market-world?
In episode #3 of the Epsilon Theory podcast, Rusty and I discuss the spike in Covid cases in Ireland and the risk of seeing a similar “Ireland Event” here in the US.
The time to act is NOW, not with indiscriminate lockdowns, but with strong restrictions on international and domestic air travel to contain the UK-variant virus while we accelerate vaccine delivery.
I believe there is a non-trivial chance that the United States will experience a rolling series of “Ireland events” over the next 30-45 days, where the Covid effective reproductive number (Re not R0) reaches a value between 2.4 and 3.0 in states and regions where a) the more infectious UK-variant (or similar) Covid strain has been introduced, and b) Covid fatigue has led to deterioration in social distancing behaviors.