Whilst 2020 will undoubtedly go down in history as the year of the Covid-19 pandemic, we suggest that 2021 will be the year of the vaccine. This week’s news covers articles on the unprecedented and sheer logistical scale of the global vaccine roll out. Yet poorer emerging markets are likely to lag behind their wealthier developed market peers in this process. Demographics specific to each country will also impact the roll out timeframes. While global equity markets are basking at near record highs, a recent study by the International Chamber of Commerce has concluded that an unequal allocation of inoculations could deprive the world economy of as much as $9.2 trillion. There is no doubt that the timeframes, costs, and extent of the roll out, as well as the efficacy of the vaccines, will have a profound influence on public health this year, but this will also be of great impact on the global economy and financial markets.
“Healthcare is vital to all of us some of the time, but public health is vital to all of us all of the time.”
– C. Everett Koop, Surgeon General of the United States from 1982 to 1989
- Global equity markets rallied this week and are set to have their best performance since November. Positive investor sentiment boosted by the various vaccine roll outs, rebounding corporate profits, and support from central banks, have translated into markets testing all-time highs.
- The Covid-19 vaccination roll out has commenced and while that is good news, the spread of the vaccinations around the world is vastly unequal. Presently, the US and UK make up about 40% of the 119.8 million doses administered globally, while in Africa only Egypt, Morocco, Seychelles and Guinea are recorded as having been given any of the vaccines at all. Much of Central Asia and Central America have yet to begin vaccinating. This could mean that developing countries could fall even further behind developed ones. A recent study commissioned by the International Chamber of Commerce concluded an unequal allocation of injections could deprive the world economy of as much as $9.2 trillion.
- With millions of vaccines being distributed across the world, how long will it be before we can return to normal? This will take longer than expected according to Bloomberg, as at the current rate of vaccination, it will take seven years to vaccine 75% of the population, thereby achieving herd immunity. For more information on this scenario, access this link.
- China’s economy has already resumed its growth trajectory following its triumph over the coronavirus. Follow this link for an article published by the New York Times on how China beat the virus and roared back to economic growth through power, patriotism and 1.4 billion people.
- The US economy will return to pre-pandemic levels by the middle of the year, even if Congress does not approve Biden’s stimulus package. This is according to the nonpartisan Congressional Budget Office. But the timeframe for re-employment of all those retrenched during the pandemic will be much longer.
- For the first time the US has fallen out of the world’s top ten most innovative economies as measured by the Bloomberg Innovation Index. The last time the US topped the Index was in 2013. America has become less dominant in science and engineering and scored poorly in higher education. South Korea ended up in first place for 2020.
- The European Union and the UK have committed to “work intensively” to come to an agreement over Northern Ireland’s border, which has been one of the most contentious parts of the Brexit negotiations.
- Mario Draghi, the former head of the European Central Bank, has come out of retirement and accepted a mandate from President Sergio Mattarella to form a new coalition government and to steer Italy out of the pandemic towards economic recovery.
- Jeff Bezos announced that he will resign as CEO of Amazon.com Inc in the third quarter of 2021. His replacement will be Andy Jassy, the head of the company’s cloud computing unit. Bezos will assume the role of an executive chairman of the company.
- In last week’s News Flash, we covered the GameStop side-show and how hedge funds had lost billions of dollars having been taken on by Reddit users’ mass buying spree of that stock. This week saw GameStop stock deflate massively, falling by 80%.
- How many South African’s have had Covid-19? The official numbers say that 1.4 million South Africans have tested positive, but the real number is estimated to be significantly higher. In November last year when the recorded number was 650 000 cases, Ryan Noach, the Discovery Health CEO and his team of experts estimated the number was closer to 13 million. Gabriel Crouse has written an article, initially published in the Daily Friend, asking the questions: How many people have Covid-19 in South Africa? How many have had it? What difference does it make and why does no one seem to know?
- Who is profiting from the pandemic in South Africa? The business branch of the ANC, the Progressive Business Forum (PBF), has lobbied for members to participate in the profits generated from the vaccine roll out. The PBF is the ANC’s main fundraising wing and bridges the business community with the governing party through a system of memberships. For more on this, follow this link.
- President Ramaphosa’s idea of a R200 billion loan programme, to mitigate the effects of Covid-19 on the South African economy, may not even reach 10% of its target. Banks were roped in to distribute loans guaranteed by the government to help small- to medium-sized businesses navigate the crisis. So far only R17.8 billion has been distributed.
- Why is South Africa’s debt at 81% viewed as unsustainable, while in other countries like the UK (85%), the US (91%), and Japan (250%) it is not a problem? The reason is debt serviceability – the ability of borrowers to make interest payments on their debt. The South African bond market does not believe budget consolidation will be achieved and thus that the associated debt trajectory will eventually be unsustainable. Nazmeera Moola & Adam Furlan from Ninety One have compiled an article outlining a three-point plan to boost South Africa’s growth prospects, reduce our borrowing costs, and make our debt sustainable.
- The rand strengthened this week due to South African factors rather than global ones! Investors have warmed to indicators that South Africa’s fiscal deficit may be lower than previously anticipated as tax collection is expected to overshoot the budget estimates. Although this news is relatively positive, Dynasty remains deeply concerned about the country’s debt trajectory and the lack of structural economic reform.
- In a statement to the Zondo Commission, former president Jacob Zuma announced that he would not appear before the Commission, stating that, “I do not fear being arrested”. This has led the State Capture Commission to lay a criminal complaint against him. The fact that current ANC office-bearers have once again come out in support of Zuma, indicates that the fight against corruption is far from over.
- Follow this link for an article published by Allan Gray on the changes to provident and provident preservation funds and what it will mean to you as an investor in these vehicles. The changes will be initiated on the 1 March 2021.
Sources: Dynasty, Reuters, Bloomberg Markets, The New York Times, Daily Maverick, and Moneyweb, etc