Vaccines on the Way, Markets Bullish
I read the NY Times article yesterday that said the U.S. passed on opportunities to acquire more than 100 million doses of the Pfizer vaccine, implying that this would lead to a shortage of vaccines in the United States. At first, I was shocked, and a little angered that we had not made a proactive move. But, on further research, this is not the case. I always have to remember that the major news outlets are there to sell ad space, not always report the facts.
The U.S. has pre-ordered 700 million doses of 3 known vaccines, and this does not reflect others in development. Thus, while there are only 100 million Pfizer doses ordered, Americans will have access to others. Should all three of these candidates gain regulatory clearance, four countries (Canada, Japan, the U.K., and the U.S.) could vaccinate more than 100% of their entire population based on the number of these three vaccines they’ve already pre-ordered. Let’s not forget that this is a new drug, so testing the vaccine on a large group could be a wise decision.
With most stocks, notably cyclicals, surging over the past few months and weeks, put-call ratios very low and bullish sentiment rising, a pause should not be a surprise. Understandably, higher frequency managers are likely to be quick to protect hard earned 2020 returns, but our expectation is that pullbacks are likely to be short lived with further upside likely through year-end into Q1.
The Employment Trends Index (ETI) ticked up 0.5% in November, the smallest of seven consecutive gains, as the recovery in labor market conditions moderated amid spiking COVID cases, partial lockdowns across the country, and uncertainty about more fiscal stimulus. Six of the eight ETI components made positive contributions last month, led by fewer jobless claims. Even so, the ETI was 10.2% lower than a year ago, and a long way from full recovery.
The Conference Board expects a pause in the decline of the unemployment rate during the winter months before resumption of the downtrend, after widespread vaccination. This also suggests the broad economic recovery will likely stall in the near-term before improving later in 2021.