Further COVID-19 vaccine breakthroughs

20 November 2020

The noise

  • Further breakthroughs in the race for a Covid-19 vaccine occurred this week as Moderna and AstraZeneca reported on the results of their trials. Moderna’s vaccine is nearly 95% effective and does not need to be stored at temperatures as extreme as Pfizer’s. AstraZeneca’s ‘Oxford’ vaccine shows a strong positive immune response triggered in adults in their 60s and 70s, a key requirement for a successful vaccine.
  • After positive news coming from vaccines, investors reined in some of their euphoria after the stark reality of the ongoing Coronavirus battle was realised later this week. New York City has shut its schools due to rising cases and Tokyo raised its alert to the highest of four levels. Markets cannot avoid the fact that despite glimmers of hope, we are looking ahead to the reality of a dark winter.
  • Despite their usually harmonious relationship, Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell have clashed this week over whether to preserve emergency lending programs. Mnuchin released a letter on Thursday demanding the return of any unspent stimulus money when the programs expire. The Fed has replied by urging the Treasury to withdraw the demand, citing that there are parts of the economy which will still rely on these programs. It is a rare moment of discord between the two entities.

The numbers


The nuance

As discussed in the noise, this week has seen another flurry of vaccine related news from Moderna and AstraZeneca. However, the market response has been muted, especially relative to last Monday, on which Pfizer’s announcement pushed equities higher across the board, providing support in particular to value names such as consumer goods, energy and hospitality which have been hardest hit by lockdown measures throughout this year.

The discrepancy in market reaction is evidence that this week’s news has only really brought additional colour to the news story that a vaccine is likely on its way. Moderna and AstraZeneca’s news offer further glimmers of hope but don’t change the underlying story that there are multiple vaccines in the last stages of trials. Optimism was likely further quelled by rising cases around the globe and additional spread prevention measures taken in the US.

Equities have looked expensive for a few months, driven by strong moves in large cap growth stocks.  As the beaten up corners of the market have rallied this week, this overvaluation is now more pervasive. As active stock-pickers, we have a keen focus on value and continue to conduct extensive analysis to identify companies with strong growth prospects which are undervalued relative to their underlying fundamentals.

Quote of the week

“At least I’m going to heaven.” Natalia Garibotto, Brazillian Glamour model.

As the head of a church that advocates celibacy in its clergy, it may come as a surprise that the official Pope Francis Twitter account “liked” the photo of Brazilian glamour model Natalia Garibotto. Whatever the truth may be – failed suppression of carnal desires, an itchy papal finger or a Vatican staffer unaware of whose account they were using – Vatican sources were quick to distance the “like” from the Holy See himself. Although the Vatican’s communications department handle the Pope’s social media communications, the Pope has now joined a growing list of world leaders whose use of social media has landed them in hot (holy) water. Perhaps the meek shall not inherit the earth after all.
Source: bbc.co.uk

Phil Smeaton
Chief Investment Officer

All investment views are presented for information only and are not a personal recommendation to buy or sell. Past performance is not a reliable indicator of future returns, investing involves risk and the value of investments, and the income from them, may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.



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