Lots of headlines about Delta
We have spent a significant amount of time discussing COVID-19, as well as the government and business mitigation impacts on the economy. Recently, there has been a number of media and financial press headlines with respect to the proliferation of the COVID-19 Delta variant as the main infection pathogen. We thought, given the recent market volatility, that we would offer our observations as it relates to our investment strategy. We noticed the following cross section of quotes recently that present a good example of the current experience that business leaders are still grappling with.
- “I think the good news, which is far more the point, is that we have a healthy underlying economy. The data is uncertain but the strength of the economy in my view is not.” – JPMorgan Chase (US: JPM) CEO Jamie Dimon
- “…we’re definitely not done with this. We shouldn’t even call it post-pandemic. The pandemic is not over.” – Fiverr (US: FVRR) CEO Micha Kaufman
- ”So if you look at average daily rideshare rides, July was our best month since March of 2020. We saw growth month-over-month, and it was an all-time high.” – Lyft (US: LYFT) Brian Roberts
Furthermore, today Apple Inc. (US:AAPL) has announced that they would be delaying a return to the office until January 2022 because of concerns related to infection spread. Also, last night the United Kingdom released very poor retail sales numbers, which is confusing because they have removed almost all domestic restrictions as of July. Consumers there have a significant amount of excess cash and there is limited travel so one would expect increased domestic retail spending.
The above does not provide a clear picture … ranging from great, to uncertain, to disheartening. The virus is a new problem and we are learning as it progresses; however, there is also good science news:
- “We’ve shown you the Moderna vaccine that if you give a third dose of the same vaccine that is currently used in the US, you actually see a very important increase in the quantity of antibodies…. and for Delta, which we care a lot about, you get 42x and so we think the boosters are going to be very helpful to keep people safe for the long term….” – Moderna (US: MRNA) CEO Stephane Bancel
“This means that” in our view, the Delta variant does remain a very serious health concern for unvaccinated people and could provide substantial “headline” risk. However, for those who are vaccinated, the risk of serious illness (in the virus’s current form) remains low and, therefore, we believe government mitigation factors will remain limited, businesses can eventually return to an attempted new normal and financial markets should look past the headlines. Valuations remain high, in our opinion, so any sustained change in the narrative could lead to pricing risk but, at this point, we don’t expect the same serious impact to the economy that occurred with the initial mitigation policies of the spring of 2020.
National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit www.paml.ca for full disclosures.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).
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