Fall Quarterly Commentary

“Veil after veil of thin dusky gauze is lifted, and by degrees the forms and colours of things are restored to them, and we watch the dawn remaking the world in its antique pattern.”

The Picture of Dorian Gray Oscar Wilde (1854 – 1900) Irish poet and playwright

The world feels topsy turvy. We are in the midst of the sharpest recession since the Great Depression, businesses are closing left and right, and yet for many it doesn’t seem like a recession at all... and the stock market is booming? The virus, and the responses to it, have turned the world upside down. Let’s straighten out what we can.

In the hard-hit U.S., while life is creeping toward normalcy, case levels nevertheless remain elevated. Europe, which had a more vigorous response and locked down harder, initially reduced cases to low levels, but is now seeing a major resurgence. This uptrend is spooking markets which fear a return to lockdowns1.

The good news is that in both regions, as we predicted, death rates have decoupled from case rates and mortality remains below March levels. This is largely due to the improved treatments we described last quarter, a different profile of the infected (generally younger), and more extensive testing picking up more cases2. The bad news is that the experts we trust most are forecasting an increase in cases, due to the rolling back of restrictions, as well as colder weather forcing many indoors where the virus survives longer and spreads more easily. All signs indicate that we remain far away from natural herd immunity.

Fortunately, we are bullish on a vaccine. There are four vaccines in Phase 3 trials (the final phase) in the United States alone, with a fifth starting in October. Given the typical Phase 3 vaccine approval rates shown at right3, this seems very promising.

The experts we listen to generally seem cautiously optimistic and it would not be surprising to see at least one vaccine approval in either October or November (while approval in either month would generate an opposite political conspiracy theory, we have full expectation of a science-based process). However, we caution that the approval of a vaccine does not mean an immediate end to the pandemic. It will take a lot of time to manufacture and distribute enough doses for everyone, and even then not everyone will be willing to take it and the first vaccine may not be 100% effective4.