Stocktake: Analysts divided on Delta threat

There’s been a lot of recent agonising about the dangers of the Delta variant. Should investors be concerned?

Some investors are worried, notes JPMorgan strategists, who point to the recent decline in bond yields, value and cyclical stocks. This mirrors market positioning in February, when investors became briefly preoccupied by concerns around the Alpha variant. That positioning wasn’t justified then and it’s not justified now, they argue – at least, not in developed markets such as Europe and North America, where vaccination progress has been strong and the link between infections and deaths has been clearly weakened.

However, some "Covid-related dispersion" should not be ruled out in emerging markets, cautions Robeco's Jeroen Blokland, who notes that less than 25 per cent of the population in Asia have received at least one dose of vaccine.

Analysts have largely focused on the threat to emerging markets, although BCA Research suggests investors in developed countries shouldn’t be complacent, pointing to slowing vaccination rates in the United States.

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Covid concerns have clearly retreated – Bank of America’s monthly fund manager surveys show it has not been seen as the biggest tail risk since March – but the potential for a slower economic reopening means investors may remain watchful in coming weeks.