It’s over

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  By Guest Blogger Doug Rowat

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Covid’s over. Like Vince-Carter’s-third-dunk-at-the-2000-NBA-Slam-Dunk-Contest over.

Naturally, the media doesn’t want you to think so. Fear sells, so witness this recent headline:

Media still capitalizing on Covid

Source: Time

A fifth wave, if it happens, would be unpleasant, but Covid’s ability to meaningfully affect economies and markets at this point has been almost completely hobbled.

First, look at the dramatic acceleration of vaccine doses administered globally. The world’s gone from less than 5% fully or partially vaccinated at the end of Q1 2021 to 51% fully or partially vaccinated presently (Source: Our World in Data, to November 7, 2021). Work obviously still needs to done, but the momentum is staggering. Most developed countries already have vaccination rates in the 70% range with Canada amongst the world leaders at 80%.

Further, for the world’s largest economy, the US, it’s virtually certain that lockdowns will never again be the strategy for dealing with outbreaks. Joe Biden has made it clear that the emphasis will be on vaccine mandates instead. Mandates aggravate the minority, including self-pitying Green Bay Packer quarterbacks and their indignant Hollywood-actress fiancées, but they actually assist the economic recovery longer term.

And it’s not just vaccines that are in play now. Antiviral pills are also emerging. Pfizer’s Paxlovid, for example, cuts the risk of hospitalization or death from the virus by 89%. It’s so effective, in fact, that Pfizer immediately stopped its trial and went straight to the regulatory approval stage. Talk about a pharmaceutical drop-the-mic moment. Merck meanwhile has had similar success with its antiviral pill, Molnupiravir, and it’s already received regulatory approval in the UK.

Second, key economic data suggests that developed economies are either fully recovered from the pandemic or will be shortly. US ISM manufacturing data, as but one example, has averaged 60.5 over the past 12 months. Anything above 50 signals an expansion of the manufacturing sector, which accounts for a substantial 12% of the US economy. 55 is a solid number. Averaging 60.5? Otherworldly.

Labour markets too are firing on all cylinders. Canada’s employment has fully recovered to pre-Covid levels and the US will be there shortly. The US unemployment rate, which hit a high of almost 15% during the Covid peak is now well below 5%. Emergency unemployment benefits for a large number of Americans also expired in September and this will further improve the employment picture as these individuals will now be forced to look for work with no shortage of employers seeking to hire them. Is it any wonder that the IMF expects the US economy to grow 6.0% this year and 5.2% in 2022?

Third, corporate earnings have been lights out. Consensus expectations when the US Q3 earnings season began a few weeks ago were for about 25% y-o-y earnings growth. Last check, companies were humming along at 40% growth. In fact, y-o-y earnings growth over each of the past two quarters has been better than 50% (with close to 100% growth coming in the second quarter). Whatever Covid overhang that may have existed for corporate earnings a year ago has now been entirely shrugged off.

Finally, use your eyes. Are hockey and basketball arenas not full? Football stadiums? Are live concerts not resuming in your city? The Rolling Stones sold out LA’s massive SoFi Stadium last month on back-to-back nights. Even Canada’s back in the swing—one of our staff attended country-music star Eric Church’s concert at Rogers Arena two weeks ago. It marked the venue’s first sold-out show in almost two years. And just last week, the NYC Marathon was run in-person for the first time since 2019 with 33,000 participants.

Below are the expectations for the global live sporting and music markets post-Covid. Neil Young was right, rock and roll can never die:

Global live sports revenue (US$ millions

Global live music market (US$ billions)

Source: Harvest Exchange Traded Funds

And perhaps the best recent proof that Covid’s over? Peloton stock has plunged about 45% over the past week on a weak subscriber growth forecast.

Face it, the world’s returning to normal.

And Peloton bikes, all the rage during the pandemic, are already becoming laundry racks.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Vice President, Private Client Group, Raymond James Ltd.