Thread by @LT3000Lyall

From both a markets & epidemiological perspective, I think there is some legit cause for concern here - if just from tail risk perspective. The Delta variant per se is no big deal, but early evidence of rising hospitalizations amongst vaccinated could be.

reuters.com/business/healt…

A similar trend is being seen in Israel - albeit it is still early days. Some epidemiologists believe lockdowns and vaccines are creating selection pressures on virus that are driving the prevalence of new mutations in the same way antibiotics can promote antibiotic resistance.

They do not create the variants (per se). What they can do is create more space for those variance to increase in prevalence as other variants die off. Lockdowns can select for more infectious variants (Delta), and vaccines can select for vaccine-resistant mutations.

It's not clear if this is what we are actually seeing - no one yet knows the full story - but it is a plausible argument/scenario. The scientific evidence is a moving feast as new evidence is emerging daily and we ought to be constantly recalibrating probabilities & opinions.

The doomsday scenario would be if a vaccine-resistant mutation spreads, particularly because now-ineffective vaccine-induced antibodies could plausibly inhibit the functioning of T-Cell immunity, triggering ADE that leads to a substantial spike in mortality amongst vaccinated.

Obviously, we can only pray that doesn't happen, and that it's a low probability scenario. However, it is a tail risk that seems to be increasing and bears watching. The key metrics to watch will be hospitalizations of the vaccinated & associated mortality rates.

What does seem apparent is that the pandemic could be far from over (the probability has gone up). Many markets/sectors have been priced for a high probability of rapid recovery. A downward repricing to reflect increasing risks to the outlook is appropriate.

PS to put a bit more colour on the selection dynamic, suppose there is a high level of covid in the population, and you decide to do a hard lockdown. Constant mutation means there will be lots of variants in population. The lockdown might kill 99% of the least infectious variants

Subsequently, you reopen, and now the 1% of the variants that are the most infectious survive and spread throughout the population. The variant itself was not caused by the lockdown, but the lockdown promoted its adaptive survival and propagation throughout the population.

Given that globally, we have a large population of people that have had covid, and that we have been continuously in and out of lockdown, it is a very plausible argument that lockdowns have been a key contributor to the emergence and spread of more infectious variants like Delta.

Some basic info on ADE. ADE is a major problem with Dengue Fever, for eg, which has four serotypes. This is why getting Dengue the second time (with a different serotype) is far more dangerous/life threatening than getting it the first time.

chop.edu/centers-progra…