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Our briefing for Friday, February 11, 2022:
Feb 11, 2022 2:52:01 PM
- The United States is exiting the “full blown” phase of the coronavirus pandemic according to Dr. Anthony Fauci, the country’s top infectious disease expert. Fauci told the Financial Times on Tuesday that he also expects all Covid-19 restrictions to be lifted in the coming months, and that includes the mandatory use of face masks. “As we get out of the full-blown pandemic phase of COVID-19,” Fauci said. “Which we are certainly heading out of, these decisions will increasingly be made on a local level rather than centrally decided or mandated. There will also be more people making their own decisions on how they want to deal with the virus.”
- In Canada, interim Conservative leader Candice Bergen has tabled a motion calling on Prime Minister Justin Trudeau to end all Covid-19 restrictions and “transition to a post-Covid society.” Bergen argues that Omicron cases are on the decline and that Canada is one of the most vaccinated countries in the world, and that public health officials have signalled that it’s time to do away with restrictions. Responding to the motion, Health Minister Jean Yves Duclos said the country might be in a different place than it was two years ago, especially because of vaccinations, but that the pandemic is not over yet.
- In the United Kingdom, all testing requirements for fully vaccinated travellers have now been dropped. Travellers who have had at least two doses of an approved coronavirus vaccine will now only need to fill out a passenger form before travelling to the U.K. Unvaccinated travellers still need to take a test upon departure and arrival, but no longer need to self-isolate while awaiting results. Earlier this week, Prime Minister Boris Johnson said he hopes to lift the final coronavirus restriction – mandatory isolation for people who test positive – by the end of February. The move is part of the government’s strategy to live with Covid-19, making the shift from legal restrictions to advisory guidelines.
- In Germany, a top court has ruled that a coronavirus vaccine mandate for healthcare workers should go into force as originally planned. Germany’s Constitutional Court on Friday said they rejected an injunction that sought to stop the measure until a legal challenge against its constitutionality is formally reviewed. A decision on whether the vaccine mandate is constitutional will be ruled on at a later date. The vaccine mandate, which will go into effect on March 15, requires staff in hospitals, nursing homes and outpatient clinics, to prove they have been fully vaccinated against Covid-19 or have recently recovered from the illness.
- South Korea announced they will be rolling out the Novavax vaccine at hospitals, care homes and public health centres next week. The Novavax vaccines will be administered to unvaccinated people, especially those in high-risk groups, officials say. The Korea Disease Control and Prevention Agency (KDCA) reported a record 54,122 cases on Thursday, a 12-fold increase from the daily levels seen in January. The country also announced on Thursday that coronavirus patients with moderate symptoms will have to treat themselves from home. Authorities plan to only treat people aged 60 and older, or those with underlying conditions, with the goal of freeing up medical resources for the more serious cases.
- Australia requires three doses of the Covid vaccine for a person to be considered “up to date” on their vaccinations. The Australian Technical Advisory Group on Immunisation (Atagi) updated their guidance to include the third shot for someone to be considered “up to date.” The new terminology replaces the old “fully vaccinated” status that applied to someone who had two doses. “Atagi has advised that if it has been longer than six months since a person’s primary course and they haven’t had a booster, they will no longer be considered ‘up to date’ and instead will be considered ‘overdue’,” said Health Minister Greg Hunt in a statement.
Covid-19 – Due Diligence And Asset Management
Fed Is Slamming the Door on Pandemic Era of Dirt-Cheap Credit
Brief: For much of the past two years, money managers were handing out credit to just about anyone that asked for it: Tech startups with no profit. Cruise companies struggling to navigate a pandemic. Retailers that rely on fading malls. But in less than two months, the carefree days of ultra cheap credit have shown signs of coming to an end. Central banks around the world that pumped trillions of dollars into markets to keep economies afloat are now rushing to scale back the liquidity and fend off inflation. Those efforts could be hastened after U.S. Labor Department data on Thursday showed higher-than-expected price increases in January. Across debt markets, borrowing has gotten harder for the riskiest companies and more expensive for even the most creditworthy. Orders for new U.S. investment-grade notes are dropping. Rogers Communications Inc., a Canadian wireless company, last week scaled back its ambitions on a $750 million bond offering that was initially contemplated at $1 billion, and ended up paying more interest than it expected, according to a person with knowledge of the deal.
European CLOs Prepare for Post-Pandemic Risks With More Flexible Terms
Brief: Collateralized loan obligation managers in Europe are preparing for the post-pandemic world of rising credit risk by adding more flexibility to their traditionally strict structures. CLOs -- which package speculative debt into bonds -- have been including options to participate in restructurings and remain involved in financings even if they go south. And while managers don’t expect a sudden deterioration of junk-rated loans and bonds anytime soon, with defaults in Europe still historically low, they want to be prepared in case things sour. “With the ability to follow their money, CLOs now have better options to sell out if they have significant concerns on poor recoveries or provide new money and benefit from the potential upside of any turnaround,” said Oliver Harker-Smith, a portfolio manager at Barings in London. CLOs historically had strict checks on their documents regarding the risks they were able to take. This meant that more often than not they were forced to sell their positions in situations when borrowers got distressed.
Investors wary of subscription model businesses as cost-of-living pressure increases
Brief: Over the last number of months some of the most popular stocks of 2020 and 2021 plummeted as their figures failed to impress, with Netflix, Peloton and Spotify all seeing share prices tumble. One thing they all have in common is the subscription model. This has led experts to question whether those models can continue to succeed particularly when consumers are facing a cost-of-living squeeze and there is substantial competition sitting in the wings. "Companies which saw high demand for services as the pandemic took hold like Peloton, Spotify and Netflix have suffered because they have not been able to hook customers in for the long haul as much, as economies have opened up and other forms of socialising have taken over," explained Susannah Streeter, senior investment and markets analyst Hargreaves Lansdown. "They are seen more as one trick ponies, offering either TV streaming, gym classes or audio on demand."
UK GDP defied Delta and Omicron to rise 7.5% over 2021
Brief: UK GDP rose 7.5% over the course of 2021, defying the year’s three-month opening lockdown and emerging variants to record the highest rate of growth since 1940. This increase followed a record 9.4% decline in 2020, as a result of the onset of lockdowns and the pandemic. Despite a variety of restrictions across the home nations, GDP only dropped slightly in December, down 0.2% for the month, less than the consensus 0.5% expectations. Emma Mogford, fund manager at Premier Miton Investors, described this as an "encouraging sign for the health of the economy", adding the "self-imposed protect Christmas" lockdown had only a "mild impact" on December growth. Daniel Casali, chief investment strategist at Tilney Smith and Williamson, agreed, suggesting that with restrictions lifted, the economic outlook is "constructive" for 2022.
How inflation and tangled supply lines are gripping the economy
Brief: Since the pandemic erupted two years ago, Forest Ramsey and his wife, Kelly, have held the line on prices at their gourmet chocolate shop in Louisville, Kentucky. Now, they're about to throw in the towel. In the past year, the costs of ingredients for their business, Art Eatables, have surged between 10% and 50%. The Ramseys are paying their employees 30% more than they did before the pandemic. And in the face of supply shortages, their packaging costs are up. They've begun using 12-piece trays in their eight-piece chocolate boxes because they can no longer get any eight-piece trays. So having just tried to survive for the past two years, the Ramseys, who own three retail outlets and sell custom chocolates to about 25 bourbon distilleries, have reached an unpleasant decision: They're going to raise their customer prices 10% to 30%. “We’ve got to adjust this — we can’t afford to keep taking the hits anymore,” Forest Ramsey said.
