When Is A Silver Bullet Not A Silver Bullet?
When is a silver bullet not a silver bullet?
That's a question market participants need to start asking themselves vis-à-vis vaccine assumptions.
On Wednesday afternoon, as US equities surged into quarter-end, capping off an otherwise dismal month with an outsized gain, Moderna CEO Stéphane Bancel threw a bit of cold water on Donald Trump's aggressive vaccine timeline.
During remarks at an FT conference, Bancel said the company won't seek FDA emergency use authorization until at least Nov
People differ widely in their attitudes about the virus and its risks. If all the bars, restaurants, music venues, theaters, and shops in a city were reopened tommorrow, some would stay away while others would immediately flock back, and each week more will return. The early returners will be usually be younger than those who initially stay away.
Look at the Chinese and European data. When those locked-down cities reopened, consumer footfall did not stay on the floor, or immediately rebound to pre-Covid levels, it rose steadily and fairly strongly over a period of a few months, heading back toward something approximating normal – unless/until a second wave happened, as in Europe. Or unless a particular class of business remained closed by govt order, e.g. movie theaters in China.
For small businesses, traffic going from 0% or 10% now to 30% in a few weeks and 60% in a few months will not always forestall bankruptcy, but it will help. For stocks, the move from 10% to 30% will quickly be extrapolated to 60%, 80%, 100%.
If expectations for a vaccine to put a floor under risk assets don’t discount the risk of the virus mutating (putting vaccine development back to square one), the March lows will be a mile marker whizzing by so fast it’ll be of little significance.
Remember, the 2nd wave of the Spanish Flu was much deadlier because the virus mutated. We take solace in knowing this virus hasn’t mutated much (relatively). That could have been said of the so-called Spanish Flu virus if they had the means to sequence its genome back then.
We know genetic mutations occur at a certain rate and the larger the population of the virus, the greater the number of mutations in the virus population.
Not only are we not out of the woods, in terms of risk, I’d say we are still moving into them.
Good point. Also along these lines, we don’t know for sure how long acquired immunity endures.
There is, in certain quarters, a growing sense of confidence that herd immunity may be considerably closer than previously thought. The standard assumption of homogeneity in SIR models might well be exaggerating the level at which it occurs.
Forgive me if pasting links is frowned upon here but this podcast is, I think, quite illuminating.
https://accadandkoka.com/episodes/episode140/
Trump only cares about the perception about the availability of the vaccine. If he gets voted out he may care it comes as soon as possible to shore up his travel exposed businesses and to boost his brand but I am not sure he cares if or when we are protected unless it benefits him.
The economic negative impact will be with is for years sadly. Way out of consensus view. It will be shocking that the hit may exceed 1% per year for years ultimately taking 7-10% off the economy off a 2021 baseline. MMT is hear to stay and support will total $10-20tn total 5 years from now. This year’s support will be a blip compared to what is coming.
I’m with you on the lingering, long-term impacts. This event will result in permanent scarring. Who cares if CCL starts cruising again in defiance of CDC guidelines. We know people will get sick. This is an industry that is coming back to pre-COVID levels for a while, if ever.
Agree also with the abundance of $T that they are going to have to throw into the hole. Yeah, that’s 7-10% and that just the first year. Follow that out for five or six years and soon we’re talking real money. It’s hilarious that Munchin and his counterparts say the D proposal is too big. hahahahha. If the Rs hold office, they’ll be spending trillions on fiscal support just like their D counterparts. MMT for sure.
Quite ironic that the Trump’s personal businesses (how many of the hundreds, we’ll never know), depend on travel without fear. Quite possibly explains his sociopathy (is that a word?). Perhaps his firms will be one of the thousands of insolvent businesses the nation will have to suffer through in the period ahead.
When Europe has a vaccine, and Europeans are accepting/taking the vaccination shot, and the media (and conspiracy theorists) pitch the FDA has illegimately approved the same vaccine, that is when we will realize people elevate politics over drug trial science and risk management. Any new drug/vaccine has risk margin error, which has to be weighed when pursuing health care decisions. Instead of casting shade on a target general availability date from a person communicating a mobilization goal, we should encourage the process to move as fast as possible under experimental/emergency use, and carefully monitor effects. Maybe I will go back long VEEV.
Nobody really knows what will happen with the vaccine or the virus in the next 12 months. It is likely we will get a robust set of treatments and a vaccine within the next two to three years. Just like after the banking panic/ GFC, change will be accelerated and telescoped due to this event. It will probably take 5 years for the economy and public to feel some sort of stability. A Trump re-election, although unlikely would push a return to normalcy an additional 5 years.
Inshalah
Agree the positive from vaccine is over-estimated, also agree that residual fear will persist–think about 1987 crash, fear of a repeat persisted for a decade making downside elevated. However, it is probably human nature to focus on the downside and not think about the positives of creative destruction and all those new innovations coming out of the crisis, including that fact that all those in their 20s and 30s coming out of the basement to buy houses, and all the new spending to fix up those houses.