In making his case for the bottom in yields and cyclical stocks, yesterday JPMorgan quant Marko Kolanovic yesterday echoed what we said earlier this week when we observed that the Delta wave may have just peaked, writing that "the US inflection is days away."
He's not the only one to piss into the Biden admin's hopes to extend the Delta crisis until the midterms, or maybe even until the next mail-in presidential election. As Morgan Stanley's resident in-house biotechnologist Matthew Harrison writes overnight, "with new cases in the US reaching ~120K/day, investor questions are centered around the timing of the new peak in cases. Based on the reproduction rate trajectory, US/UK hospitalization relationship, and previous peaks, we expect the next peak to occur in ~1-2 weeks."
As Harrison notes, the only question on investor minds is when will Delta be over?
To this his answer is that a peak would occur in late August / early September. Based on detailed data we now believe that US cases may be approaching a peak within the next 1-2 weeks (~August 15th-25th) for the following reasons:
(1) During the 5 major prior peaks in cases over the past 1+ year (Exhibit 1, blue dashed lines), the peak in reproduction rate (Rt)values
(Exhibit 1, middle panel) was consistently reached prior to the peak in new cases (Exhibit 1, top panel),and specifically ~9-21 days in advance (except from Jan 8th wherein new cases and Rt peaked on the same day). This may suggest that the next peak in cases could be predicted by the timing of the peak in Rt values and, therefore,given that the latest peak in Rt was on July 24th, the next peak in cases could be reached by ~Aug14th. Note that,unlike Rt, the doubling time (Exhibit 1, bottom panel) does not appear to be a leading factor of new cases
(2) By overlaying the hospitalization data in the UK over the US data, Harrison had previously illustrated that US hospitalizations lag UK by ~1 month. Given that the UK hospitalizations peaked on ~ July 25th, it could be expected that US hospitalizations may reach a peak on ~August 25th, while the cases may peak sometime around August 20th (assuming ~1 week lag between cases and hospitalizations);
(3) If the number of daily cases currently is adjusted for vaccination coverage in the US (assuming ~50% fully vaccinated people and ~85% vaccine efficacy), then the current number of new cases is similar to the highest peak in cases in January (~250K/day). Given that, and assuming that it is not very likely for the upcoming peak in the summer (with most activities being outdoor) to exceed the January peak, this is another reason why Morgan Stanley expects the cases currently to be approaching the next peak soon.
Taken together, Harrison writes that "the above reasons suggest that the next peak in cases may be reached within the next 1-2 weeks." He also references the same data from the Institute of Health Metrics and Evaluation (IHME) in WA which we presented earlier this week, and which he says projects that the peak in US cases is nearly reached...
... even if the CDC's average projection that aggregates forecasts from 25 major modeling groups (link) indicates that the peak in US cases won't be reached before September.
Bottom line: if the Biden admins hopes to use covid as the strawman for trillions more in stimmies and for mail-in voting in the next elections, it will need to dramatically ramp up the media panic over the next, lambda variant as delta is almost done.