Data does not drive investors’ decisions in the markets

Forget about economics and corporate disclosures. Advances in immunization are what fund managers and analysts are watching to see which markets are recovering from the impact of COVID-19 and to guide their investment decisions.

Global economic growth is expected to rebound this year to exceed 5%, while Refinitiv IPS expects 2021 profit growth of 38% in Europe and 21% in the United States.

But these expectations and investment models depend almost entirely on the speed of immunization campaigns. New strains of Covid-19 and recent extensions to lockdown measures make official statements and profit and loss disclosures by companies too old to be trusted in investment decisions.

“The vaccine race is the biggest unpredictable factor. It will dictate projections and assumptions about global growth in 2021,” said Mark McCormick, director of equity market strategy at TD Securities.

“While vaccines may support a more simultaneous recovery in the second half of the year (of 2021), early figures reinforce the fundamental disparity between the United States, the eurozone and others.”

The question is which country will vaccinate 60 to 70% of the population – the threshold that is supposed to ensure herd immunity, so factories, bars and hotels can be safely reopened. Any delay may require more stimulus from governments and central banks.

And the lack of continuous vaccination campaigns has forced some to extend initial estimates of when to achieve collective immunity. Late fall looks more realistic than summer, Deutsche Bank says, although spring in the northern hemisphere is expected to be a turning point, with vaccinations of 20-25% and restrictions gradually being lifted.

But the race winners are not hidden from anyone, and at the forefront of all is Israel, where a rapid vaccination campaign has drawn a torrent of investment to its markets and pushed the shekel to its highest. level in 25 years.

An injection in the arm

Others like South Africa and Brazil, at a slower pace, have been punished by the markets. Meanwhile, the pound is at an eight-month high against the euro, which analysts attribute to better vaccination prospects; About five million people received the first dose, and the number doubled last week.

Shamek Dar, chief economist at BNY Mellon Investment Management, expects GDP growth in Britain and the United States to increase to double digits, compared to slow progress for the euro area.

“It is more difficult in the euro zone, the horizon is a little more blurry because it seems that the immunity of the herds will take longer (since the vaccination programs are slower)”, he says.

The eurozone lags behind countries like Britain and Israel in per capita immunization programs, prompting Germany to extend a full lockdown until February 14, while France and the Countries -Bas are about to impose a nighttime curfew.

Jack Allen-Reynolds, chief European economist at Capital Economics, said slow progress on vaccinations and closures had caused him to lower forecasts for euro area GDP growth in 2021 by a full percentage point at 4%.

“We assume that GDP will return to its pre-pandemic levels sometime in 2022 … We see the eurozone’s recovery will be slower than that of the United States and Britain.”

The United States began vaccinating the population last month, which is also ahead of most other major economies, with a vaccination rate of around 5%.

Deutsche Bank said that at the current rate, 70 million Americans will have gained immunity by April, which is the limit of protection for those most vulnerable to the disease.

A strong rebound in global equity markets as fiscal stimulus plans wait

Some, like Eric Bauermeister, director of fixed income instruments for emerging markets at Morgan Stanley Investment Management, point out the trading risks of vaccine developments, saying markets appear to assume things will return to normal, which could open the door to disappointment.

But the prevailing view is that consumers will eventually put the savings back into travel, shopping and entertainment, amid a generous stimulus. Meanwhile, investors are trying to forestall market moves as closures begin to ease, says Hans Peterson, head of asset allocation at Seib Investment Management.

Peterson says, “Movements (of the market) are currently dependent on reducing infection rates … If this trend reverses, we need to go back to investing in US tech stocks.”