Investors wait for reopening

The delta variant of the novel coronavirus has led to a rapid increase in new Covid-19 cases, hospitalizations and deaths since early summer. It hasn’t knocked the economy back on its heels, but it has slowed it, and the bright future that many businesses thought they were experiencing is yet to come.

The stock market is reflecting the situation. Even as the S&P 500 nears record lows, many stocks that rose in hopes of reopening early in the year are running water or worse. Shares of Walt Disney are down 7.7% from their spring highs, shares of cruise operator Carnival are down 26.5% from their peak, Delta Air Lines stock is down 21.3% from its highs and restaurant operator Brinker International is down 33.1%.

Figuring out how the prospects of these companies might change over the next several months is impossible. Unlike at the start of the year, when it seemed abundantly clear that the vaccination rollout would soon stop the pandemic in its tracks, the course of COVID-19 now seems less certain.

The accelerating pace of vaccination, the implementation of more vaccine mandates, the end of the air-conditioning season in the hard-hit South, as well as the rising trend of COVID-19 over the past few months, together suggest that the country may be in a better position by October. can. With the prospect that a booster-shot campaign is under way by then, one can imagine an economy that will soon be back in full swing of reopening.

However, other scenarios can easily be imagined as well. Outbreaks in schools, many of which are fully individualized for the first time since the pandemic, can shut down classrooms, leaving children and their parents at home again. In that case, it may not be until vaccines are approved and available for children under 12 that people start lowering caution flags again. That may not happen until sometime in early 2022.

If it’s just a matter of months—reopening that starts in October versus January—what’s the difference? There is a very different holiday season than many businesses are relying on now. Another uncertainty is even greater, as the pandemic has messed up previous predictions. Vaccine approval and rollout for children may take longer than expected, may stunt growth in people who have recently been vaccinated, or cause more virulence of the novel coronavirus.

As a result, many investors may prefer to wait until they have a little more confidence in their forecasts before placing bets again. Especially since the price of those bets is higher than before. Stock reopenings may be well below their peak, but they are much higher than they were last September. For example, Disney’s shares are up 39.8% from a year ago, and Delta’s is up 28%.

The good news that is finally coming may not be the price of fully reopening plays just yet. But the markets probably need to see at least some better signs before investors can bet on a return to normalcy.

This story has been published without modification to the text from a wire agency feed