As a variant of the virus and vaccines will affect the world economy
Facts, comments and scenarios on vaccines and variant of the virus in the analysis by Richard Flax, chief investment officer of Moneyfarm
The health situation in the UK is deteriorating rapidly. The discovery of a new strain of Covid-19 that could be 70% more transmissible than the original has led to immediate restrictions in parts of the country – particularly London – and further disruptions to the movement of people.
The Minister of Health has already anticipated the possibility that these new rules – including the closure of non-essential commercial activities – extend until spring and the Chancellor has extended the closures until April. We will therefore see the attention of analysts converge around two questions: is it a more lethal strain than the original? Could the vaccine be ineffective?
The impact of this discovery could exacerbate the economic crisis, delay vaccine distribution and postpone recovery until later. For this reason, the effectiveness of the vaccine against the Covid-19 variant becomes a crucial question.
If the UK suffers the most in the short term, global markets could also face a period of weakness, particularly following the optimism expressed by equities at the prospect of a robust recovery in 2021. In a recent survey by Deutsche Bank , the virus mutation was at the top of the list of the largest sources of risk expected by investors for 2021. But it is also true that identifying the risk does not mean being ready to manage it.
If the vaccine proves effective and its distribution does not suffer particular hitches, we believe that the volatility in the markets will be reabsorbed in the medium term. In this scenario, we will certainly be able to consider adding more equity to our portfolios, especially those with a higher level of risk.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/come-variante-del-virus-e-vaccini-influenzeranno-leconomia-mondiale/ on Tue, 22 Dec 2020 12:28:42 +0000.