So if I think that the probability of everyone getting COVID in the next six months is much likelier than the market, at least for a few days, what trade would capture that?
I suspect the first step in answering has to be what impact that increased infection is expected to produce. We should consider transmission rate and virulence. To that we need to think about the current vaccines as well.
If we see a case of significant increases in transmission rate but a reduction in virulence then I would be surprised to see a big market drop due to this (but would expect to see some lower prices in January anyhow). If we see that the new strain is protected from by the existing vaccines that holds too. We stay on the current recovery path so investment/trading plans don’t really change here.
If we see a significant increase in transmission and virulence then you have to think about potentials for additional limitations on domestic and global economic activities again. Might not be unreasonable to think some of the travel/leisure companies are not going to make it so shorting that area should have a number of companies whose value goes to 0. Might also be some potential pure plays on building supplies in the HVAC area that specialize in air quality and ventilation (retail and commercial). That might be based on both people being concerned about their home systems and updated building codes to address airborne infectious pathogens such as coronavirus like this.
The inability of the existing vaccines to protect against the new strain of the virus reported from the UK would only add to the down presser and to incentives to invest in higher quality indoor air.
While I think it is very difficult to infer just what is really moving the market in most cases one might flip the question here. Given the market is doing X, what does the imply about the assessment of the health and economic impacts of the new strain of virus. Is it that much more infectious? More virulent? Do you get immunity from it via the existing vaccines or have expectations that very quick modifications and use approval exist?
I suspect the first step in answering has to be what impact that increased infection is expected to produce. We should consider transmission rate and virulence. To that we need to think about the current vaccines as well.
If we see a case of significant increases in transmission rate but a reduction in virulence then I would be surprised to see a big market drop due to this (but would expect to see some lower prices in January anyhow). If we see that the new strain is protected from by the existing vaccines that holds too. We stay on the current recovery path so investment/trading plans don’t really change here.
If we see a significant increase in transmission and virulence then you have to think about potentials for additional limitations on domestic and global economic activities again. Might not be unreasonable to think some of the travel/leisure companies are not going to make it so shorting that area should have a number of companies whose value goes to 0. Might also be some potential pure plays on building supplies in the HVAC area that specialize in air quality and ventilation (retail and commercial). That might be based on both people being concerned about their home systems and updated building codes to address airborne infectious pathogens such as coronavirus like this.
The inability of the existing vaccines to protect against the new strain of the virus reported from the UK would only add to the down presser and to incentives to invest in higher quality indoor air.
While I think it is very difficult to infer just what is really moving the market in most cases one might flip the question here. Given the market is doing X, what does the imply about the assessment of the health and economic impacts of the new strain of virus. Is it that much more infectious? More virulent? Do you get immunity from it via the existing vaccines or have expectations that very quick modifications and use approval exist?