In my view, Omicron warrants some level of concern (though not panic). Here’s what we know and don’t know at this point, and my thoughts on some of the potential implications.
What We Know
Omicron is a new variant of COVID-19 that was first identified in South Africa, where it’s now the dominant strain of the virus. As of this writing, it has already spread to a number of other countries and regions, including Botswana, Hong Kong, Europe, and Israel. According to initial reports, most of the cases seen so far are concentrated among younger patients, who tend to be either unvaccinated or not fully vaccinated. (For context, South Africa’s vaccination rate is approximately 25%.)
Our healthcare analysts here at Wellington Management tell me that the mRNA vaccine is best positioned to be modified to provide protection from new COVID-19 variants. An Omicron-specific version of the mRNA vaccine could be available in as little as six weeks, but clinical testing, mass production, and distribution of it would likely take up to six months—even for developed countries.
What We Don’t Know
Three key questions around the Omicron variant center on: 1) its transmissibility; 2) its virulence; and 3) vaccine efficacy against it. While it’s too soon to have any definitive answers, early data suggest a potential base case of high transmissibility and largely unknown virulence (due to the relatively small number of cases right now), but at least some degree of vaccine efficacy. We should have more clarity on these and other characteristics of the variant by mid December.
Another critical question: Could the Omicron variant usher in a third wave of the pandemic? It’s hard to say with what we currently know, but it’s possible. Much will depend on the above answers. For example, if it turns out to be a less-virulent strain, and if existing vaccines prove even somewhat effective against it, we’d already have a leg up on it (unlike in previous COVID episodes).
The views expressed here are those of Nanette Abuhoff Jacobson and Wellington Management’s Investment Strategy Team. They should not be construed as investment advice. They are based on available information and are subject to change without notice. Portfolio positioning is at the discretion of the individual portfolio management teams; individual portfolio management teams and different fund sub-advisers may hold different views, and may make different investment decisions for different clients or portfolios. This material and/or its contents are current as of the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management or Hartford Funds.
What I’ll Be Watching Most Closely
Of all the wildcards at play here, of which there are many, I think vaccine efficacy against the Omicron variant is going to be the most important data point to keep an eye on going forward. Efficacy of more than 50% would, in my view, bode well for further progress on COVID-19 vaccination rates and booster shots, as well as for the resumption of the economic recovery.
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