Vaccine roll-out boosts market rally but investors have concerns

Despite widespread optimism there are fears that the vaccine will not be the saviour we are all counting on

Vaccine roll-out boosts market rally but investors have concerns
Steve Randall

News that scientists had beaten all the odds and created not one, but several, effective COVID-19 vaccines was the boost that we all needed.

But the surge of optimism – and relief – felt collectively across the world a few weeks ago, has now been met with concerns that the jabs will not be the panacea we are counting on.

Although the market rally continues with vaccine roll-outs imminent in Canada and the United States, some investors are worried that 2021 will not be the year the world gets control of the pandemic.

A Deutsche Bank client survey shows that 40% of respondents fear that the virus may mutate and make vaccines ineffective; more than 3 in 10 are concerned that serious side effects or a lack of willingness to have the jab will dampen vaccination programs.

Other potential risks for the coming year, according to the survey results, are that the tech bubble – aided by the pandemic’s drive for home-working - will burst, causing significant impact across global markets; and that governments will scale back stimulus measures too soon.

“Interestingly, all the vaccine-related concerns filled out the top three which may suggest that although consensus is for a good 2021, a successful vaccine rollout could still bring upside surprise relative to expectations,” said strategist Jim Reid.

A recent survey of institutional investors also sounded a cautious note for economic recovery in 2021.

Meanwhile, investors are looking at the supply chain around vaccines for opportunities.

Distribution and cold storage are sectors that are likely to gain from the global drive to vaccinate billions of people, while 2021 will provide clarity around the duration of immunity provided by vaccines; requirement for an annual jab will provide ongoing interest in vaccine producers.

Despite concerns, the markets are currently showing increasing risk appetite.

Along with the pandemic, investors are also hopeful of additional stimulus in the US. The Fed meets this week and could surprise markets with further asset-buying. Congress is also considering almost $1 trillion of relief over the coming days.

The greenback is under pressure from the rising sentiment, further buoyed by slim hopes of a Brexit deal even as the UK-EU transition agreement approaches its Dec. 31 end.