Vaccines for the many or the few?

The world’s scientists are now making significant breakthroughs in the race for a Covid-19 vaccine. Nevertheless, the virus is still likely to cause economic damage as it spreads through the winter.

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  1. Charles Stanley

It is bullish news that Moderna has now joined Pfizer with a working vaccine that has produced good results so far from Phase-3 Clinical trials. Each company needs to produce further results concerning safety as well as efficacy to persuade the regulators to allow general use.

Moderna’s product has shown it protects almost 95% of those vaccinated so far, with Pfizer’s also over 90%. Neither producer can be sure if the vaccine will stop the spread of the virus or whether it will just lessen the severity of the infection in vaccinated people. Each producer hopes to secure regulatory approval this year and to start to sell the product as soon as possible. Both wish to scale up substantially next year to get the vaccine out to many hundreds of millions of people worldwide.

Stock markets have celebrated the news by rising, boosting sectors that have suffered badly from the anti-virus policies pursued by governments. Bulls seem to think controls will be lifted by spring as the virus subsides, allowing more normal life to resume as summer in the northern hemisphere takes over. Others are more pessimistic, pointing to the long period needed to vaccinate sufficient people to make a big difference to the spread of the disease, and anticipating more delay in getting to large numbers of vaccinated people.

The virus is proving persistent this winter. There have now been 55 million identified cases worldwide, with 1.3 million deaths attributed to Covid-19. The US leads the totals with 11.5 million cases and 252,000 deaths, followed by India and Brazil. Belgium and Peru continue to head the table for deaths per million of the population, whilst France has had the largest number of cases for a European country. All of this continues to make uncomfortable reading for governments who persist with social distancing and closure orders for various types of event and business activity. The scientific advisers continue to recommend these measures to limit the spread of the disease and – if anything – want more and longer control.

So, what will the vaccine change?

If enough people are vaccinated in any given country it should increase the pressure on the government to relax the controls. Sufficient rollout is unlikely to happen before spring 2021 and may be later, though there should be earlier relaxation following recent lockdowns if the virus subsides from this latest round of regulations. It is also possible that as the northern hemisphere comes out of winter the virus will wane anyway, making it easier for governments to relax. This much is worth a bit of a rally from shares.

What the coming of the vaccines does not change is the determination of governments to continue on the green journey, leading to closures and write-offs on a large scale in all fossil fuel producing and using areas of an economy. Nor does it change the balance sheet damage done to many travel, tourism and leisure businesses by a year of poor trading and lockdowns as they seek to rebuild their customer base and trade within the limitations of continued social distancing.

The whole edifice of this bull market is sustained by generous Central Banks. Money growth has tripled in Japan to 7.5%, is a lively 10.4% in the Euro area and has continued gently up in the USA after the massive second-quarter burst from Fed action. Investors have wished to cut their cash holdings and have clambered back into markets for fear of missing out, even though the prospects for earnings and economic growth are disappointing at best. The vaccine is a good story to boost more activity and justify some wider share exposure.

It will help some but does not solve the problems created by the green and digital revolutions for traditional businesses. It will reinforce the role of governments in business life, given the active engagement of them with the vaccine research companies and their support for the casualties of anti-virus policy. The world will now turn to discuss fair shares of the vaccines for all and work out how to spread them thinly without profiteering. The coming of the vaccines will extend the interest in ESG investing, and the need for companies to behave in an ethical way. Governments will wrestle with green led growth and the need to address inequalities which have been highlighted by the different impact on employment from pandemic measures.

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