Who’s Looking Forward To ‘Normal’?

More encouraging vaccine headlines looked to bolster risk sentiment in the new week as the University of Oxford and AstraZeneca said their COVID-19 vaccine is 70.4% effective.

While short of the high bar set by Pfizer and Moderna, Astra and Oxford said efficacy could be as high as 90%.

“Phase 3 interim analysis including 131 COVID-19 cases indicates that the vaccine is 70.4% effective when combining data from two dosing regimens,” Oxford said, in a press release. “In the two different dose regimens vaccine efficacy was 90% in one and 62% in the other.” The regimen with the higher efficacy used a halved first dose and standard second dose.

The vaccine “can be easily administered in existing healthcare systems,” Oxford remarked, noting that it can be stored “at ‘fridge temperature’ (2-8 °C) and distributed using existing logistics.” There were no serious safety events.

AstraZeneca CEO Pascal Soriot said the vaccine “will have an immediate impact on this public health emergency” and added that the shot’s “simple supply chain” and the company’s “no-profit pledge and commitment to broad, equitable and timely access means it will be affordable and globally available supplying hundreds of millions of doses on approval.”

“Today’s AZN/Oxford COVID-19 trial efficacy data continues the pro-cyclical optimism, with early UST bear-steepening and RTYA outperforming NQA, [while] Eurostoxx show[s] the obvious tilt towards ‘economically sensitives’ and away from ‘duration-sensitives,” Nomura’s Charlie McElligott wrote.

So that’s that, and again, it comes on the heels of Pfizer and Moderna’s blockbuster readouts. Over the weekend, the head of the US government’s “Operation Warp Speed” said the US plans to start vaccinations with Pfizer’s shot within days of approval by the FDA, which is expected early next month. Widespread vaccination and herd immunity is targeted for May 2021 in the US. (That’s assuming everyone in the country hasn’t already had it by then. America is averaging more than 150,000 new cases per day. Just call it a new approach to “achieving” herd immunity.)

There will be some questions about the lower average efficacy for AstraZeneca’s shot, and more specifically about how best to administer the vaccine. But it sounds as though it has better mass appeal than the Pfizer and Moderna shots and can be nearly as effective with the right regimen.

In any case, this just adds to the growing body of evidence to support the notion that “normal” could make a comeback in 2021, but not before the western world makes it through a “dark winter,” as some have described what’s coming.

Asian equities rose Monday, but global stocks are now struggling to make headway, as the push-pull from new lockdowns and expectations of a brighter tomorrow leaves investors torn.

“The growth narrative is improving as positive news about vaccine development has sparked hopes that the end of the COVID-19 pandemic is on the horizon and that life, the global economy, and markets can return to normal,” SocGen’s emerging market strategists wrote Monday. EM, you’re reminded, is a favored trade for what’s expected to be a better, healthier future for the world. “While there is light at the end of the tunnel, a number of challenges still remain for EM assets,” they added. That’s true for all assets.

Meanwhile, developed market policy is a mess. And Rabobank’s Michael Every was back to critique it. I say “back” — I may have just missed something, but he seemed to take a break from penning the bank’s “Global Daily” letter for a week or so. But the cadence behind Monday’s edition left little doubt about its author. I didn’t even have to check to know it was Every.

“For all the talk of Great Resets, what we still see is a Great Reflex to go back to the status quo policy,” he wrote. “There is… talk of pay-freezes for public-sector workers, of tax hikes, and of higher pension contributions, hitting all those at the bottom of the ladder whom COVID-19 already hit hardest,” Every went on to say, noting that looming on the horizon is a conjuncture that will employ elements of “both MMT and austerity/MMonetarism.”

Of course, that’s counterproductive, and Every suggested as much. “Let’s push in demand via higher state spending and yet simultaneously suck demand out via austerity to deal with the massive government debt pile that central banks have already de facto monetized!,” he quipped.

If we succumb to the same policy juxtaposition that crippled the recovery post-GFC, when pretensions to austerity left monetary policy on its own to sustain economic momentum, the vaccine will just mean a return to a “normal” that was defined by ever widening inequality and the same kind of social tensions that set the stage for the resurgence of toxic populism and noxious nationalism in the first place.

2015/2016 was a kind of “back to the 1930s” moment, only without the war drums. Hopefully, we won’t look up in 2024 and find ourselves talking about a “back to 2015/2016” scenario.