It could well be that the end is in sight for this pandemic, and stock markets around the world have rallied this week on the news.
So this week I’m going to take a look at this new vaccine, what it is and how it might work, what it has already meant for stock markets and investors.
It’s unusual for me to write about stock markets, even though the media particularly headlines them BUT (spoiler alert) it doesn’t suddenly mean we at Thornton think we can predict or time market events like the many pundits out there.
Yes, we’ve had some extremely positive news out this week with the release of data about a new vaccine which appears to be effective against Coronavirus from the drug company Pfizer, and its German partner bio MTech.
We’ve been told it appears to be 90% effective in its trial so far.
The vaccine trials are by no means over. But this is one of about a dozen vaccines in the final stage of testing (or phase three) and waiting for more data before seeking emergency regulatory approval, which Pfizer hopes to do for this particular vaccine before the end of this month.
The scientific community deserves to be congratulated on how quickly they have developed an effective vaccine; Pfizer in particular.
The standard vaccine development timeline is years and years; not a matter of months.
Markets responded incredibly positively to the news which could spell the end in sight for the lockdown ramifications of this global pandemic. But it is only one part of the solution and not the silver bullet.
A vaccine combined with more effective treatments, combined with growing immunity herd immunity to the vaccine, and also continued social distancing measures, could well be enough to unlock global economies to unlock society and get back to some sort of new normal.
What we know so far is this vaccine has been tested on 43,500 people in six different countries.
To date, there have been no safety concerns raised by this vaccine trial.
It uses an experimental form of vaccine messenger RNA which is apparently ‘genetic codes and classic genetic code being injected to provoke an immune response and create what’s called T cell immunity’.
And it means that Pfizer and BioNTech can roll out this vaccine much faster than they would be able to mass-produce a conventional vaccine.
Once emergency approval is granted, they’re expecting to be able to produce 50 million doses by the end of this year, and then a further 1.3 billion doses next year. So, a significant number!
However, every person receiving this vaccine will need two doses. So 50 million this year will only inoculate 25 million people.
The UK is expected to receive 10 million doses this year. So 5 million people can be vaccinated before the end of this year potentially, and the UK has ordered a total of 30 million further doses of the vaccine so far, once the vaccine has been approved.
Oh, and we’re in the Isle of Man, so I guess we need ‘Ashy’ to order our own supplies
However, before you go off and book your 2021 holiday, it’s already been announced that prioritisation will be given for health care workers, as well as elderly residents in care homes, and then older and more vulnerable people.
People under the age of 50, who are in good health, are going to be at the back of the queue for this particular vaccine.
And one particular challenge is the logistics that come from having to store the vaccine in an ultracold environment of at least minus 80 degrees centigrade. This storage requirement could slow down the distribution of the vaccine.
Shares in the drug manufacturer Pfizer got a lift by 14%, whilst the FTSE 100 index of leading UK company shares was up on the day of the vaccine announcement by 4.67% (or 82 billion pounds of market capitalisation) which was its best daily performance since March.
We saw similar price rises on global equity markets around the world.
And it’s fair to say the markets have been (partly pricing in already and) waiting for this good news about the vaccine for quite some time.
It comes, of course, off the back of a couple of other significant market moving factors as well.
One is the Bank of England announcement last Thursday morning that it’s going to buy a further £150 billion bonds as part of its bond-buying programme with quantitative easing.
And the second factor of course over the weekend, President-Elect Joe Biden confirmed as the winner of the US presidential election, and so this certainty bringing more good news for markets.
The vaccine is good news in particular for the travel airline hotels industry with that sector up by more than 50% in one day.
The markets see a way out of this pandemic; some return to normality. They see us going away on holiday, booking international air travel, booking hotels.
But, of course, where there are winners are always losers to some of the companies which have benefited from the lockdown and the change in our (consumer) behaviour; for example, Zoom, the video communications company, Peloton the indoor exercise bike company, and Ocado who do home shopping deliveries.
The stock market expectation that once the vaccine is widely available, once we’re out of this lockdown scenario, that consumer behaviour will revert to the norm shows the benefit of diversification of different assets classes and many various holdings within those asset classes.
Which means you can’t reliably pick winners and losers and you really can’t time markets.
At Thornton, we advocate time in the markets NOT timing the markets.
You know there are going to be sceptics out there. There are going to be people who are not willing to be vaccinated. And there are lots of different arguments about what level of herd immunity is required to control COVID-19 effectively, but time will tell.
Market volatility is here to stay, and remember stock markets go up more than they go down (historically, which is not guaranteed in the future!)
So will we all be going out again going on holiday, going to restaurants, getting meals out, going to the cinema etc.?
In the Isle of Man, we’ve been lucky enough to be able to get life back to normal and back to the gym. But for many, working from home in our living rooms is here to stay for so many more which will have a lasting legacy on depressed commercial and perhaps a corresponding uplift in residential property values? Who knows.
This leads me neatly on to the new Isle of Man Landlords Bill which next week Natalie is going to put together a summary of key points for those of you interested in learning about the many changes and ramifications for property owners and their tenants.
I hope this round-up of this positive last week in an otherwise year of pandemic blues has been of interest, but as always if you have any comments, I would love to hear from you as would my colleagues John and Natalie.