Covid-19 vaccine

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Global markets rose sharply on news of an effective Covid-19 vaccine, sparking hope of a sustained recovery on the horizon


12 November 2020 | 3 minute read

Global markets rose sharply on news of an effective Covid-19 vaccine, sparking hope of a sustained recovery on the horizon. Guy Foster, our Head of Research, looks at what we know so far, and the implications for investors. 

An end to the pandemic could finally be in sight, as preliminary tests of the vaccine from US drug giant Pfizer and partner BioNTech have showed it to be 90% effective in preventing Covid-19. This is far more effective than most experts and the market expected, with news that the first doses could be rolled out by Christmas lifting spirits around the world.

The study showed that 94 of the 43,538 participants given two doses of the vaccine or placebo developed Covid-19, at seven days after the second dose. A successful vaccine is, of course, great news for the economy and investors after months of uncertainty, restrictive measures and so many businesses forced to shut their doors and rely on government support packages.

However, while this is much-needed good news in the fight against Covid-19, there are unknowns and hurdles ahead before we can say with certainty that the battle is won.

How soon will we get the vaccine?

The UK’s deputy chief medical officer Professor Jonathan Van-Tam says he is “hopeful we could see some vaccine by Christmas”. However, prime minister Boris Johnson has stressed that the breakthrough is in its “very early stages”, and there is some way to go yet. It will be with larger scale vaccination programmes into 2021 that the virus may finally be contained.

Pfizer plans to apply for emergency approval from the FDA towards the end of November, and produce up to 50 million vaccine doses in 2020, and up to 1.3 billion in 2021 (each patient requires two doses). The first doses are likely to be administered mostly in the US with some in the UK and Europe, where deals have been struck.

At present, those in the UK who are categorised as the most vulnerable, including care home workers and residents, may receive the vaccine by Christmas, with elderly, at risk groups and frontline workers to follow. The NHS has been told to prepare for mass Covid-19 vaccinations from early December at drive-through centres and GP surgeries.

However, there are several unknowns, such as how long immunity lasts, and the vaccine’s efficacy across all age groups. Yet even if its effects prove not to be long-lasting – and notwithstanding the logistical challenge of distributing it given that it must be kept at an exceptionally low temperature – it may serve as a bridge. In the first instance that can be for a relatively brief period until another variant of the same experimental vaccine which broadly follows the same approach, but where other variants do not need to be kept at quite such low temperatures. Over the medium term though, these experimental approaches can serve as a further bridge to a traditional vaccine such as the one currently being worked upon by GlaxoSmithkline and Sanofi.

It now seems likely that there will eventually be some diverse sources helping to meet the massive global demand.

What does this mean for investors?

The obvious urgency amid a global pandemic has fast-tracked the process for testing and approving a Covid-19 vaccine, with hopes of a vaccine development within the year.

The news of an effective vaccine provides a much-needed injection of certainty and was highly positive for the markets. Global markets soared on the vaccine breakthrough, with the FTSE 100, Japan’s Nikkei 225, and Hong Kong’s Hang Seng, and the US Dow Jones all rising on the news.

Of course, this is one of several vaccinations in development. At present there are more than 100 vaccine programmes under way, with dozens of drugs in development. With so many researchers rushing to find a solution to end the current crisis, there will be plenty of money spent that will not result in profits. But ultimately, there will likely be several vaccines rolled out across the world.

The speed of development has been unprecedented and marks a tangible advance for pharmaceutical companies in the creation of future vaccinations and treatments to tackle healthcare crises. The prospect of vaccinations facilitating the eventual lifting of lockdown restrictions remains a characteristic of our expectations for 2021.

That should facilitate a continuation of the increase in economic activity. The market reflects that in higher valuations for some of the businesses that have been impeded by the slowdown in economic activity – which is most of them. There has been a converse fall in the share price of some of the “COVID winners” – the e-commerce and cloud computing facilitators whom consumers and businesses have turned to at an accelerating rate. But despite these minor setbacks which follow an amazing year, the end of Covid-19 is a boost to all companies. It is just more positive for some than others.

There is likely to be disruption to our lives into 2021. Yet the Covid-19 landscape will continue to evolve at pace, and this positive news appears to be the first step towards a resolution, and brighter times ahead.

Guy Foster, Head of Research
Guy leads Brewin Dolphin’s Research team, providing recommendations on tactical investment strategy to Brewin Dolphin’s investment managers and strategic recommendations to the group’s Asset Allocation Committee. He is a CFA charterholder, holds the CISI Diploma, and is a member of the Society of Business Economists. Guy frequently discusses financial issues with the written and televised media as well as presenting to the staff and clients of Brewin Dolphin.

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