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Surge & Burnout: Why we think the virus has run its course

9 min read
Terence Moll, Head of Investment Strategy09 Sep 2020

In the last eight months the coronavirus has changed the world, cutting a swathe of death, illness and economic chaos across the globe. Lockdowns were applied in many countries, millions of people lost their jobs, and economies recorded their sharpest crashes ever.

Fortunately, we believe the worst is over. The virus is coming under control, and the world is moving back towards normal.

Company sales and earnings will bounce, particularly in the US, and equities should stay strong. We expect stocks beaten-up by COVID-19, like airlines, cyclicals and industrials, to make a comeback.

We think this for two main reasons. First, in countries and regions where the virus had a big surge, it’s well on the way to burning out. In cities like London, New York and Johannesburg, a form of herd immunity has been reached, meaning we do not expect a second wave, something we can all be thankful for.

Moreover, the recent global case and death numbers have been far lower than in March-April. In most countries, it looks like the virus is burning out.

Scientists have also been studying the virus, and they understand it better, know how to treat patients, and several vaccines are looming. Two leading vaccine candidates are those from Oxford, and from BioNTech. The trials have been promising and vaccines could be available by early 2021.

Back towards normal

As a result, we think that peoples’ social lives will soon resume in much of the world. Within a few months, most of us will be back at work, eating out when we wish, and flying abroad on business or on holiday. Children will be back at school. You’ll be able to hug your friends again and pack those masks away.

We are not downplaying the virus – we know many countries are still struggling with the pandemic. But across the UK, Europe and parts of America, Asia and Africa, the COVID-19 wards are largely empty and deaths have slowed to a handful. In the UK, case numbers, patients in hospital and deaths have all plummeted since April.

The story is the same from countries and regions where lockdowns were minimal. Many US states, for example, locked down only a little, and began opening up after only a few weeks. The US virus numbers were alarming for a while. At their height, in mid-July, almost 70,000 new cases were being reported each day. In the last few weeks, though, new case numbers in the US have been trending down1.

Similar patterns are found in countries where the coronavirus has been raging almost unchecked, like Chile, South Africa and Belarus. Across the world, the coronavirus is looking far less scary than in March.

What happens next? Back in March, TEDx speaker Tomas Pueyo outlined a scenario he called The Hammer and The Dance2, in which the world lurched between lockdowns when the virus surged (Hammer) and easings when it seemed under control (Dance) for a year or two until a vaccine arrived. This was based on the idea that anyone could be infected – and that any infection was potentially lethal.

But it’s become clear that COVID-19 is not the equal opportunities disease Pueyo imagined. And that changes everything.

Two out of five people killed by COVID-19 worldwide have been in care homes. Healthy people under 60 tend to shrug off the virus with no symptoms, or only mild ones in the main3. Of those who do get more severe symptoms, high initial viral exposure and the amount of virus circulating in their body (known as viral load) predict how severe their illness will be. This explains the many deaths amongst medical staff, care home workers, drivers and security guards. Men of working age are twice as likely to die as women. Behind the headline mortality stats are also thousands of people who’ve survived the virus but are left with debilitating symptoms.

Within these patterns, there is some good news. The virus is like a fire spreading through a forest in which most of the trees are clad in asbestos, some are painted with a thin or patchy fireproofing, and the rest are unprotected. The first trees to perish are those that are unprotected (equivalent to care homes). Some of the thinly fireproofed trees will survive, depending on the intensity of the heat (that’s like the viral load). And after that there’s nowhere for the fire to go, because the trees are all protected by asbestos (immunity). The fire dies out.

It now seems there are far more fireproof trees than we initially thought. This simplified metaphor suggests that in areas that have been badly hit by COVID-19, it won’t come back. The virus surges at first, then burns out. In hard-hit places like London, New York and Johannesburg, there will be no second wave. Life can return almost to normal.


We find evidence for this Surge and Burnout theory in ‘Virus-in-a-Box’ studies of closed communities - such as the Diamond Princess cruise ship, prisons, and quarantined towns such as Vò, a small town near Venice, Italy. These are like COVID-19 lab experiments.

These ‘boxes’ tell us three things about the virus. First, if you step in early and test and isolate people (and re-test, as in Vò), you can stop the spread of the virus and limit illness and deaths. Second, at least 40 percent - and possibly up to 75 percent - of those who get the virus may be asymptomatic4.

Third, once those most vulnerable to the virus have caught it, the death rate falls. In a US prison called Marion, there was a death rate from COVID-19 of 0.56 percent5, not far off the 0.37 percent of the Diamond Princess6, despite the prison’s male population, much higher infection levels and (likely) higher exposure and viral loads.

Let’s now compare the ship and prison boxes with London and New York, two much larger boxes that were overwhelmed with cases in March-April but where case numbers have since plunged and deaths have all but fizzled out. These huge city boxes each contain around nine million people of a younger demographic. Do the death rates reflect this?

In London, mortality reached 140 per 100,000 people7, on an age-standardised basis. In New York it was double this at 281 per 100,0008. If you dig down into lower socioeconomic neighbourhoods, you get over 200 deaths per 100,000 in London boroughs like Brent and Newham. In New York, you can find up to 717 deaths per 100,000 people in areas of Brooklyn, and over 500 in Queens and the Bronx. This is wildfire infection, comparable to US prisons.

Politics, government, healthcare systems, density of population, and poverty all play their part in the varying figures between the two cities. But one way or other, the graphs point to a kind of viral breakpoint. Looking at charts plotting both New York State and London cases, the numbers indicate that almost nobody has the virus anymore.

Herd Immunity

What’s going on? Gabriela Gomes, a chaos theory expert at the University of Strathclyde, has been modelling the spread of COVID-19 as part of an international collaboration. Her findings support what we see in these virus-in-a-box studies. She has built two models: one in which everyone is equally susceptible to the virus, and another in which some people are more susceptible than others.

“The outbreaks look similar at the beginning. But in the heterogeneous population, individuals are not infected at random,” she explained in an article in The Atlantic9. “The highly susceptible people are more likely to get infected first. As a result, the average susceptibility gets lower and lower over time.”

According to Gomes, this means that the huge surges in cases and deaths we’ve seen around the world are unlikely to happen again. Based on data from several countries in Europe, her results show a herd-immunity threshold of less than 20 percent10.

In other words, if one in five people has had the disease and is now immune, this slows the spread to such an extent that each person infects less than one other, which produces a kind of herd immunity. Think of all those fire-proofed trees. New York City, with 25 percent antibody prevalence and London, with antibody prevalence of 17.5 percent, should be almost immune to further surges.

Other research produces herd immunity thresholds of more like 40 percent11, so this remains an open question. It’s possible, though, that some people who’ve had coronavirus and are immune don’t have antibodies, which would point to a lower measured herd immunity threshold rather than higher.

Whether people who have had COVID-19 and recovered stay immune is the big unknown, but the indications are promising.

What we can say, based on current data, is that the COVID-19 virus mutates at only one quarter of the rate of seasonal flu. This gives us hope for the potential development of effective long-lasting vaccines against the virus to protect the elderly, people with weak immune systems, and other vulnerable people. We do this with the yearly flu jab. Perhaps we can do the same with a regular COVID-19 jab.

If the Surge and Burnout theory is right, then life should soon return to normal in hard-hit areas, with precautionary measures to protect the vulnerable. You can think of masks and social distancing as extra fire-proofing. Any small pockets of disease are like burning embers rather than a full-scale conflagration and can be stamped out.

What does this mean for us?

We reach four conclusions about COVID-19 and its impact on the world. First, herd immunity can be reached when about one in five people has had the virus. In places where it surged initially, it has burned out. There will be no scary second wave in London, New York, Johannesburg or Santiago.

Second, lots of people who have coronavirus show no symptoms. This may have led to an undercounting of confirmed cases and to death rates being overestimated. The disease is not nearly as vicious as we thought back in March.

Third, treatments for people who catch COVID-19 are improving fast. It’s not so dangerous anymore. And finally, there’s a very good chance that vaccines will be widely available by early next year.

These conclusions are great news. Taken together, they suggest that social life can resume quickly in areas where the coronavirus has surged – including much of England, most of South America, and the US.

People will get back to work, they’ll start going out and travelling again, and they’ll be able to shake hands and hug their friends without feeling uneasy. Children will go back to school, and students will go back to university.

Aided by the biggest government stimulation packages in history, we expect most of the world’s economies will recover quickly. Manufacturing production will recover strongly, which will benefit equity markets in countries with a manufacturing bias.

Company sales and earnings will bounce, particularly in the US, and equities should stay strong. We expect stocks beaten-up by COVID-19, like airlines, cyclicals and industrials, to make a comeback.

The world should get back to normal within the next 12 months, at the latest. Sooner than you think, coronavirus will begin to seem like a horrible nightmare.





4 Oran & Topol. Prevalence of Asymptomatic SARS-CoV-2 Infection.








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