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The Vaccines Are Here. Are We Out of the Woods Now?

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This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here


The 7-month-long wait appears over.

After Pfizer (PFE - Free Report) /BioNTech (BNTX - Free Report) announced successful trial results of their vaccines, Moderna (MRNA - Free Report) and AstraZeneca (AZN - Free Report) offered similarly encouraging news. Admittedly AstraZeneca’s results were not quite as straightforward. But we’ll take it. We are finally seeing some light on the horizon.

Financial markets celebrated the news. Not just with a stock market rally, but also with a noteworthy rotation out of the long heralded “work from home sectors” such as technology over to the “we’re going back into the office sectors” such as Financials and Energy. Based on this reaction, it almost seemed like we are just an appointment at the doctor’s office away from opening up our economy again.

One major event will appear very soon. The FDA and its international counterparts will provide a timely authorization in order to expedite the rollout of the vaccines. Still, we are looking at a time period of several months, before large parts of the population receive the vaccine. To what degree is the stock market reaction justified? We would argue that as always, markets are forward looking. Maybe more than ever. But it is important to temper our expectations. That is, the vaccines were widely anticipated. While granular details about their finalization could not be predicted, markets were largely laboring under the assumption that we should be able to have some form of normalization of public life within 2021.

The real news? Additional details are now available about what the timeline might look like.

A major factor is going to be the structure in which the vaccine is going to be rolled out. That is, which population groups are going to receive the vaccine first? For the record, we believe that economists should be the first to receive the vaccine! The current publicly discussed strategy would prioritize health care and essential workers as well as the group most vulnerable to the disease, such as elderly and those with risk factors.

While this sounds simple and reasonable, implementation will still be challenging. Details of any strategy will have to be figured out. Take the initial group of healthcare workers without the essential workers. This alone makes up a group of roughly 20 Million people, which need to somehow be ranked, given we won’t have this amount available immediately.

Furthermore, the most scalable strategies such as vaccinating an entire team within a hospital (or the entire hospital) might have unforeseen consequences. Since we cannot exclude the possibility that individuals show symptoms afterwards, it might become necessary to quarantine to be safe. Which might cause some short- ages in staffing.

We need to remind ourselves: the logistics of the Pfizer and Moderna vaccines will be challenging. Both aren’t very forgiving when it comes to temperature fluctuation during transportation and storage. This might make it somewhat challenging to reach urban areas for a while. Until the transportation chain details have been figured out. AstraZeneca’s vaccine is not as high maintenance in this regard. But it was also slightly less successful during trials.

Which brings us to another challenge: Public acceptance.

If the coronavirus pandemic has taught us anything then it is that the opinion and views of the public play a crucial rule in the success of fighting a contagious disease.

As the long (and still ongoing) battle against wearing masks demonstrated, shaping the opinion of the public has become more challenging. With more and more information sources emerging. That make it increasingly difficult. For the medical and scientific community to provide credible information on treatments.

With the public monitoring the trial results for the vaccines very closely, it will be paramount to inform large parts of the population about the importance of a widespread immunization. In order to prevent yet another U.S. geographic political division similar to the mask, where parts of the population refuse to take the vaccine. With the positive vaccine results it appears that we have the entered the second half of the fight against Covid-19. We are hopeful that we will be successful in the rollout.

But we don’t have this one the bag, yet, in our conservative view.

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