Europe appears to be entering its 4th wave of the COVID pandemic with a surge in case numbers across much of continental Europe.
Across the Atlantic in the US, case numbers have also begun to pick up again, though the virus is not seen as a major headwind for markets, with the inflation and monetary policy outlook still the focal point for investors.
Australia appears better placed going into our summer with a significantly higher vaccination rate than either the US or Europe and our booster program now well underway.
All in all, vaccines are largely holding the line against the most severe health impacts of the pandemic, and aggregate government mobility restrictions are unlikely to shift significantly. Recent significant trial success with new anti-viral drugs from Pfizer and Merck also adds to the case that the pandemic fades as an influence over the coming 6-12 months.
This suggests the global economic recovery will continue to progress in 2022 despite some near-term angst around a fresh COVID wave in Europe and the US.
Importantly, each successive wave has resulted in less economic and market impact. While we could see some rotation away from cyclicals again, we believe this pattern of market resilience to the pandemic will continue to hold true. Australia seems well placed to weather our own version of the next wave, albeit we will still have to digest higher case numbers in coming months.
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David is one of Australia’s leading investment strategists.