The Delta Variant - is it that much different?

Hue Frame

Frame Funds Management

Over the last few months, we have seen the focus of the world’s media shift from the original COVID-19 strain to its younger sibling – the delta variant. The remainder of this piece will discuss the differences between the Delta variant and original strain in terms of transmissibility, hospitalisation rates, and deaths, as well as the potential economic impact of its spread.


The Delta strain of SARS-CoV-2 was first identified in India last December. It spread throughout India and the United Kingdom before reaching the United States and Australia. By the end of July, it was responsible for more than 80% of new US COVID-19 cases and is the variant that has caused New South Wales to be plunged into a now months-long lockdown.


The main cause of this rapid spread is due to Delta’s transmissibility compared to the original strain of the virus. According to Dr Perry Wilson, a Yale epidemiologist, the Alpha mutation (first found in the UK) was 50% more contagious than the original SARS-CoV-2 virus, but Delta is 50% more contagious again. Practically, this means in a completely unmitigated environment (no masks, social distancing, or vaccinations) one person infected with the original virus would transmit the disease to approximately 2.5 other people. In the same setting, a person with the Delta strain would infect roughly 3.5 to 4 other people.

The reason for the increased transmissibility is still under investigation, but preliminary and yet to be peer-reviewed studies suggest infection with the delta variant leads to greater levels of the virus accumulating more rapidly in human airways. This seems to then result in more viral particles being spread. Current speculation points to the P681R mutation of the Delta variant being responsible – it is believed the mutation causes the spike proteins to be split in a way that more effectively fuses with the cell membrane (shown in the diagram below). This ultimately means the variant can infect more cells in a given amount of time.

(Graphic produced by Nik Spencer (2021) and is based on work done by Hui Liu from the University of Utah).

As the delta variant is more infectious, hospitalisation rates are higher which makes logical sense – more people with the virus means an increased chance of an adverse reaction, leading to higher hospitalization rates. There is no evidence however that delta is more deadly than the original COVID-19 variant. Some preliminary studies from Scotland and Canada suggest that the risk of hospitalisation from Delta is higher than the original variant however these claims have not been peer-reviewed or verified.

It is also difficult to accurately compare death and hospitalisation rates, as the Delta variant emerged as the global vaccine rollout had started. Delta also may appear more infectious because it has caused more outbreaks in populations that contain higher risk factors, or in regions that had experienced more stress on their hospital systems.


One thing is very clear, however – the vaccines are still very effective against preventing serious disease and death at the hands of the Delta variant. Most studies have concluded that all vaccines currently being used in Australia (Oxford/AstraZeneca, Pfizer/BioNTech, and Moderna) significantly reduce the risk of death by more than 85%, regardless of the variant. All vaccines do not provide much protection after 1 dose, and full protection will not be provided until roughly 14 days after the second dose.

There has been a wide array of studies conducted on the various vaccines and their effectiveness in preventing infection, all with differing results. When talking about the efficacy of the vaccines, it seems the proof is in the pudding – if you compare the cases and deaths in the United States and the United Kingdom before and after the vaccine rollout, it is immediately evident that there have been far fewer deaths in the post-vaccine era.

Despite the spread of the Delta variant globally this year, global market indices have continued to rise. Since NSW entered lockdown at the start of July, the S&P ASX200 has stubbornly risen more than 2.5%. In that time most other states have also experienced snap lockdowns to contain cases as they emerged.

Market impact

After looking at how aggressively the market rebounded in 2020, investors seem to feel they are better off remaining invested and buying any dip. This perspective is aided and abetted by central banks who continue to inject record amounts of liquidity into their respective economies and maintain accommodative policy settings. With such little return on low-risk investments, investors continue to believe accepting the equity risk premium is worthwhile.

We also expect another round of ‘revenge spending’, in particular when NSW reopens. While the latest round of government support is not as extensive as ‘JobKeeper’ and ‘JobSeeker’, there will undoubtedly be pent-up demand ready to be unleashed once the NSW economy is back up and running. We expect our ‘reopening’ businesses (retailers, travel companies et cetera) to make up some lost ground into the end of the year as vaccination rates hit targets and Australia once again becomes open for business.

The original version of this article can be found here.

This information is prepared by Frame Funds Management Pty Ltd (ACN 608 862 442) (Frame Funds, we or us) is a Corporate Authorised Representative (CAR No. 123 9068) of Primary Securities Limited (ACN 089 812 812 635) and is intended only for "wholesale clients" within the meaning of sections 761G and 761GA of the Corporations Act 2001 (Cth). This material is not intended to constitute advertising or advice (including legal, tax or investment advice) of any kind. These materials are not to be distributed to any person who does not qualify as a wholesale client and must not be copied, reproduced, published, disclosed or passed to any other person at any time without the prior written consent of Frame Funds. Primary Securities Ltd (ACN 089 812 635 635, AFSL 224 107) is the Trustee of, and issuer of units in, the Frame Futures Fund (Fund). In deciding whether to acquire, or to continue to hold, units in the Fund please read the current Information Memorandum available from Frame Funds. Past performance of the Fund is not a reliable indicator of future performance. The value of an investment in the Fund may rise or fall. Returns are not guaranteed by any person. Total returns are calculated before tax and after ongoing management costs. In preparing this information, we have not considered your investment objectives, financial situation or personal circumstances and therefore the Fund may not be suitable for you. Neither Frame Funds, Primary Securities Ltd, nor any of their respective related parties, directors or employees, make any representation or warranty as to the accuracy, completeness, reasonableness or reliability of the information contained in this publication or accept liability or responsibility for any losses, whether direct, indirect or consequential, relating to, or arising from, the use or reliance on any part of this material. Any rates of return, forecasts or estimates contained in this publication are not guaranteed. The content of this publication is current as at the date of its publication and is subject to change at any time. It does not reflect any events or changes in circumstances occurring after the date of publication.

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Hue Frame
Founder & Portfolio Manager
Frame Funds Management

Hue Frame is the founder of Frame Funds Management and Portfolio Manager for the Frame Futures Fund and Co-Portfolio of the Frame Long Short Australian Equity Fund.

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