Note from Raymond James Energy Research Team - Oct 11

[dan_s]

Energy Stat: Reopening, the Series Finale (We Hope) - With Half of the World Vaccinated, Lockdowns Are Fading Away

You are reading the (almost certainly) final edition of Raymond James’ global reopening tracker, concluding a project that has lasted 18 months: the entire duration of the pandemic thus far. To be crystal-clear, this does not mean that the pandemic is over, now or anytime soon. Here is what it means: lockdowns (i.e., substantial business closures) are no longer necessary as public health measures to curtail COVID transmission. After four months of improvement, global reopening as we define it stands at 96% (i.e., 200 million people under restrictions), surpassing the previous high of 95% from 12 months ago.

The game-changer since May 2021, when reopening bottomed at 55% (i.e., two billion people under restrictions), has been dramatic progress in vaccination in Asia-Pacific and other emerging markets. With 46% of the world’s population at least partially vaccinated, the nexus between COVID and economic restrictions has shifted - we believe, on a sustainable basis - from lockdowns to vaccine mandates / passports. We expect - and, frankly, hope as well - that there will be no need to continue the tracker in the months ahead. That said, a note of caution is warranted: if the pandemic has taught us anything, it is to avoid ironclad predictions. Finally, we note that this collaborative report includes the latest macro thoughts from Raymond James’ equity strategist.

Equity strategy highlights. As the Delta variant’s infection curve increased from March to August, 10-year sovereign yields declined, driving a narrative of weaker global growth, and a flattening yield curve. Since mid-August, as COVID cases have subsided globally, 10-year yields have increased. With yields moving higher, equities have been weaker globally, although areas of equity markets that are more consistent with “value” or “cyclicality” or “re-opening” have performed much better. As long as COVID metrics continue to trend in a favorable direction, we expect higher yields, a choppier overall equity market, but distinctly better performance in value/cyclicals, which tend to outperform when yield curves are steepening.
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MY TAKE: Covid related lockdowns have caused serious supply chain shortages and problems that will take time and lots of energy to rebuild. Demand for oil, gas and coal will move a lot higher than where they were pre-pandemic. "Post-Pandemic World" will be very good for upstream oil & gas companies. Demand for strategic metals will be discussed on tomorrow's EPG webinar. Please register today if you wish to attend.