US backs plan to suspend Covid-19 vaccine patents

07 May 2021

The noise

  • Markets responded dramatically to comments by Treasury Secretary Janet Yellen on Tuesday as she said: “it may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat”. The former Federal Reserve Chair’s off-the-cuff remark is exactly the sentiment which current Chair Jerome Powell has been avoiding at all costs. Markets sold-off in response to Yellen’s comments.

  • The US has backed a temporary suspension of intellectual property rights for Covid-19 vaccines, a move that has been hailed as a key moment in the fight against the virus. The patent waiver for vaccines would in theory allow anyone to manufacture the vaccine without fear of reprisal from large pharmaceutical companies.

  • Forecasts suggest that the US labour market is expected to have added nearly 1 million jobs last month, highlighting the acceleration of the economic recovery thanks to widespread coronavirus vaccinations and hefty fiscal stimulus. Unemployment is expected to drop to 5.8%.

The numbers


The nuance

The reaction to Janet Yellen’s comments indicates how uncertain the market is around the direction of future monetary policy. On Tuesday, Yellen (the US Treasury Secretary) pointed out that interest rates may need to rise over time to keep the US economy from overheating as a result of government spending. The subsequent sell-off (especially in technology stocks) shows that investors still aren’t fully bought into the Fed’s insistence that rates aren’t going to move any time soon. The Fed was quick to mention that Yellen does not speak on their behalf. The first and second rule of central banking: don’t talk about interest rates rising.

Inflation remains a nascent threat lurking beneath the surface and investors are clearly still unsure about when it will emerge and how the Fed will respond when it does. Even Yellen’s fairly uncontroversial comment (which did not claim that the economy would overheat, merely what the Fed would likely do in response) was able to spook markets. Corners of the technology sector in particular are at risk given their already stretched valuations and the vulnerability of future cash flows to rising yields.

However, as has been a recurring theme of the last year, once the Fed had cleared matters up and Yellen had unambiguously said she is not predicting interest rate hikes, the news was quick to be forgotten. Applications for US state unemployment insurance fell to a pandemic low and productivity showed a rebound – which made for much happier reading.

More corporate earnings releases this week have demonstrated further strength in our holdings. As investors, it is always comforting to see our research and analysis proving its value as companies announce results much in line with our thinking which the market had not quite priced in fully. Our holdings remain on track to deliver and we continue to scrutinise their releases to ensure this is still the case.

Quote of the week

"She picked Lucifer." 

When it comes to baby names, I’m a big believer in keeping it simple. Tom, Dick or Harry may be vanilla, but kids can be mean, so why risk it. Not for a pregnant woman from Winchester, who has been urged to change her mind over her choice of baby name, after being warned it would cause "years of bullying and religious confusion". It’s true that the church plays an increasingly small role in the UK, but I thought it would be a while until school registers are filled with Satan, Beelzebub, Mephistopheles or Al-Shaytan. Imagine organising that play date…


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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