Rob Smith, who covers health care for Capital Alpha (https://capalphadc.com), reminds us of a history lesson: “Delta variant that currently dominates U.S. infections was first detected in India in Dec. 2020. It was identified in the U.S. in March 2021. By May, Delta accounted for 0.1% of cases; by June it was 9.5%; and it currently accounts for over 99% of cases. Although early data don’t look good, it remains to be seen exactly how transmissible Omicron is relative to Delta. It’s also unclear whether it causes more severe infections in both unvaccinated and vaccinated populations and how these factors may vary demographically.” (Source: “Omicron Rising — What to Watch as the World Races for Information,” analysis emailed November 29)
Omicron has made lots of news and we will assume most readers are already well informed from the news flow. So we will try to add some very specific details. We think the market response is too complacent. One major “flash poll” showed that only 10% of the responses from financial market agents showed serious concern about Omicron as a theme for the rest of the year. We’re clearly in the “contrarian” camp on Omicron.
The biomedical data firm nference shared a graphic on Twitter to enable us to understand the unusual structure of the Omicron spike protein and why it has caused so much concern so rapidly. They tweeted: “Here is how B.1.1.529 (#Omicron #B11529) compares to Alpha, Beta, Gamma, Delta variants.
“Omicron has highest novel spike mutations including striking cluster on the ‘crown,’ suggesting significant selection pressure & antigenic distinction from prior strains.”
Here’s an early indicator as to Omicron’s impact. Paul Schulte in Singapore noted this in an email to me on November 29: “The news from South African hospitals is that cases of ICU and oxygenation were up four-fold from a few weeks ago. From about 150 to about 650. Bad news. But the good news is that ONE HUNDRED PERCENT OF THOSE IN ICU OR ON OXYGEN for the new variant were unvaccinated or had a single shot.”
On the other hand, Bloomberg is reporting that 10% of the hospitalized cases in Tshwane, South Africa, are children under two (“Toddlers Make Up 10% of Hospital Cases in Omicron Epicenter,” https://www.bloomberg.com/news/articles/2021-11-29/young-kids-make-up-10-of-hospital-cases-in-omicron-epicenter).
Wastewater lab testing is a leading and early warning indicator of transmissibility. Thus far, in Twshane, South Africa, tests are showing high transmissibility of Omicron when compared with Delta. Epidemiologist Katelyn Jetelina (https://yourlocalepidemiologist.substack.com/about) emailed this note and chart:
“We are also seeing a rise in wastewater tests. Wastewater is actually an incredibly accurate, early indicator of case rise. The figure below shows wastewater tests in the city of Tshwane (near South African epicenter) alongside lab confirmed cases. Detection of COVID-19 in wastewater is almost as high as it was with Delta. So, this could mean a rise in cases is coming. This also could mean that cases are mild so they are going undetected. Time will tell.”
Note that the rate of increase in wastewater viral load is steeper at this point in the emerging Omicron-driven surge than it was in the Delta-driven surge earlier this year. (Ed. Note: The orange arrows are ours.)
We now have evidence that Florida is tracking wastewater for indications. The Sun Sentinel reports: “While the new omicron variant likely is in Florida by now, it could be weeks before it gets confirmed, said Dr. Glenn Morris, director of the University of Florida Emerging Pathogens Institute. Researchers are testing COVID samples and wastewater to monitor for its presence….” (“New omicron variant is likely in Florida, but it will take some time to confirm that,” https://www.sun-sentinel.com/news/fl-ne-when-omicron-reaches-florida-20211129-zp5mlsl6jffdtaxhopvpft4phu-story.html)
Other states are doing the same. Missouri and Virginia are examples. See “Omicron variant not yet detected in Missouri wastewater,” https://www.kshb.com/news/coronavirus/omicron-variant-not-yet-detected-in-missouri-wastewater, and “Virginia to test sewage to help predict COVID-19 outbreaks,” https://www.fox5dc.com/news/virginia-to-test-sewage-to-help-predict-covid-19-outbreaks.
I will stop for now. Omicron is rapidly moving worldwide. The next two or three weeks will likely reveal how big the US disease surges will be and where they will occur and if they will again overwhelm our hospital systems. The forecasts are not sanguine. For example: The IHME model update has Florida at over 20,000 cases a day by January; that’s a tenfold increase from pre-Thanksgiving.
At Cumberland Advisors, we remain around double market weight in the healthcare sector in our U.S. Equity ETF portfolio. COVID ain’t over.
David R. Kotok
Chairman of the Board &Chief Investment Officer
Email | Bio
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