June 2021 – Alpha, Beta and Delta

June saw the return of Covid in a big way for London and the UK.

While in much of Europe/USA, a covid case is now a rarity, in the UK case numbers are up dramatically – 20-fold in my part of London for instance (see graph below). The Delta variant now accounts for >90% of the cases and, wow, does it spread easily. Other countries, notably Australia, will almost certainly have some of this to come – but you hear it from London first.

The UK is aiming to outrun the Delta variant by vaccinating. The complication with this plan is that you need two jabs to have even a hope of avoiding Delta, and if you have AstraZeneca than your hope is only a 60% hope even with 2 jabs. A virus with an underlying reproductive factor of 8 laughs at protection of only 60% – reducing 8 by 60% leaves the Delta variant with the same reproductive ratio as the original Covid-19 variant.

The UK appears to be now effectively on a ‘herd immunity’ strategy. Even the Astra vaccine does effectively stop death – as of the end of June, not a single under 50-year-old who had two jabs had died of the Delta variant – and hospitalisation. And of course children manage to avoid hospitalisation and death too – so can ‘safely’ acquire immunity by catching (and then spreading) the virus. Being miserably sick for a couple of weeks, and risking extended ‘long Covid’ symptoms, looks like the price 40% many of us are being asked to pay.

Meanwhile here in London the ongoing disruption is real. London’s vaccination rate is about 10% lower than the rest of the country – especially in the centre. This is reflective of lower rates among younger and more ethnically diverse demographics, which London overindexes on. Meanwhile the Test and Trace system is becoming annoyingly effective – my workplace had over 30 people made to self-isolate for two weeks after somebody on one floor of the office caught Covid.

London remains much quieter than normal. The City’s square mile remains ghostly, and even the school run in my suburb is subdued right now. But there are encouraging signs of life and buzz returning. Under the current plans, London and the UK will have ‘freedom’ restored in two weeks’ time – at which point most Covid-related rules/guidelines become voluntary. This amounts to a giant experiment, and a leap of faith in no Epsilon/etc variant emerging that is even worse than Delta. My fingers are crossed.

Meanwhile, in the markets, there has not been much to report. The USD has regained its position versus the GBP. The stock market (Beta, for CAPM wonks) continues to climb. Tech stocks in particular rose sharply – my ‘Tech growth’ subportfolio climbed 8% in the month.

My portfolio’s returns are as usual shown here. My portfolio outperformed the market (that’s the alpha my my headline) by about 1% on the month, largely due to my tech exposure. I have had a couple of windfalls recently so I am feeling distinctly overweight cash, but will fix this more patiently than I did when I lost my house in March 2020.

Despite my portfolio growing by well over £100k in June, my dividend picture in June was particularly miserable. This time last year, the dividend drought hadn’t quite started – it really began in July. So my 2021 June dividend income (admittedly an incomplete analysis at this point) is 40% down on last year. I am hopeful that July will see better news.

The big news in my portfolio was the transfer of EQi’s customers to Interactive Investor. I have several accounts with EQi so this has left me with quite a bit of spreadsheet admin to do in my tracking system. For the most part this migration was very smoothly handled and, aside from my gripes at various aspects of ii’s platform and interface, it won’t make a difference to me. It does however leave me with some concentration risk and lower diversity than before – without any reduction in complexity because I now have 7 accounts on ii to manage through various logins / account profiles.

All in all, yet another month in a long extraordinary run for equities. July, 2 trading days in, is already up another 1%. Let’s see what the rest of the month holds.