It’s been just over a year since COVID halted life as we know it worldwide. It seems like an eternity. With the light at the end of this tunnel finally visible, let’s take a deeper look at the current state of the virus and the outlook ahead.
As we finally approach herd immunity through vaccinations and infections, new cases have declined substantially. Combined with some continued social distancing measures, national new daily cases have declined 80% from their winter surge of more than 250,000 per day.
Some states, like Florida and Texas, have fully reopened. While this has caused their new case rates to remain slightly elevated, they are still seeing a sharp reduction in new cases. California, with continued distancing measures in place, is doing exceptionally well. New cases in Orange County, CA, are down 95% from February. Indeed, California is finally planning to fully reopen by June 15. Even Disneyland is finally opening its doors.
No doubt the reduction in new cases can be significantly attributed to vaccines in arms. Biden’s original pledge to vaccinate 100 million people in his first 100 days was achieved in less than half that time. In fact, the US is tracking to achieve more than twice that amount by Biden’s 100th day. We have been vaccinating more than 2 million people per day on average since February, with a recent high of more than 4.5 million on a single April Saturday.
The vaccination statistics are truly impressive:
Nearly the entire elder population, the most at risk from the virus, has received at least 1 vaccination dose. About half of those 18+ have also gotten at least one dose. Given the studies showing the effectiveness from even one dose of multi-dose vaccines at preventing severe outcomes, this is incredible progress. Younger age groups will soon be in this mix as well – both Pfizer and Moderna have already applied for emergency use in the 12-16 age groups, and they should be ready to seek that same authorization for all remaining children by late summer / early fall.
Dr. Anthony Fauci and other experts have estimated that herd immunity could be effectively reached when 70% or more of the population was immune through either previous infection or inoculation. With estimates that approximately 30-40% of the population has already been infected, combined with the current pace of vaccinations, herd immunity may be mere months away.
Indeed, countries that have fully vaccinated 40% or more of their populations (along with some degree of previous infections) have all seen significant and sustained declines in new cases. Israel and the United Arab Emirates, for example, paint a promising picture for our path ahead.
As predicted, the pace of vaccination has been uneven across the globe. Blood clot and production problems have plagued the AstraZeneca vaccine, which Europe was tied heavily to in its vaccination hopes. Moreover, the US drew up the funding/advance purchase contracts with Pfizer and Moderna to effectively give the US first rights to vaccine orders. Only fair, perhaps, as the US’ Operation Warp Speed was what effectively got these vaccines developed and in record time. Indeed, the US is set to receive enough collective vaccine doses by July to inoculate 400 million people – a surplus relative to the entire US population.
With the rest of the world struggling to access effective or any vaccines, vaccination rates have become starkly divided. The US vaccination rate is nearly 5 times that of Europe (e.g. France, Italy, Spain), and nearly 10 times that of developing nations (e.g. India, Brazil). It’s unclear what this means for truly defeating the virus, but at least near-term this suggest US resumption of activity will remain domestically focused.
Path Forward & Investment Implications
With the vaccination progress being made, consumers are finally getting out and about – back to long-awaited experiences and travel (within the US, at least). Restaurant dining data shows we are back to 80% of the dine-in traffic seen in 2019. Airline travel is solidly over 60% of pre-COVID levels. These numbers should only continue to improve. Indeed, given the rapid pace of vaccinations, US GDP growth estimates for the year have been revised sharply up from 3% last winter to 6-8% now.
It’s difficult to tell how much of this excitement and resumption of experiences and travel is already baked into stock prices. Or just how much pent-up demand for these things there may truly be. Many experience names – restaurants and live entertainment, for example, are trading well above pre-COVID levels. Indeed, most have been running hot since the vaccinations were approved for emergency use last November. Appropriate positioning around names tied to reopening has been a key component of our portfolio strategy over the last year. With the pace of vaccination happening a bit quicker than anticipated, we are keeping a close eye on reopening data and adjusting our positioning accordingly as expectations for experience related companies come into clearer view.