This week marked a pivotal moment in the fight against the coronavirus with the U.S. beginning a historic COVID-19 vaccine rollout Monday. Although there are still some issues with supply and distribution to be worked out, investors are optimistic the end could now be in sight. The market also responded positively to reassurance from Fed Chairman Jerome Powell that the Fed will remain accommodative for the foreseeable future, even with its upwardly revised economic forecast for 2021. Powell said the Fed will continue its bond-buying program until the economy reaches maximum employment and will not raise rates until inflation exceeds its 2% goal. Stocks set a new all-time high Thursday before retreating Friday with the virus raging and no new stimulus measures passed.
Weekly Returns
S&P 500: 3,709 (+1.27%)
FTSE All-World ex-US (VEU): (+1.58%)
US 10 Year Treasury Yield: 0.95 (+0.05)
Gold: $1,880.66 (+2.24%)
EUR/USD: 1.2257 (+1.21%)
Major Events
- Monday – In a historic day, the U.S. administered the first doses of Pfizer’s COVID-19 vaccine to health-care workers.
- Tuesday – Oil rose to a nine-month high over optimism of the coronavirus vaccine roll-out.
- Wednesday – The Federal Reserve voted to hold short-term rates near zero as expected and raised the economic outlook slightly to a 4.2% growth rate and 5% unemployment in 2021.
- Thursday – The SEC charged Robinhood Financial with misleading investors over its main source of revenue generated, payment for order flow, and failure to satisfy its duty of best execution. Robinhood agreed to pay $65 million to settle the charges.
- Friday – Congress approved stopgap funding to keep the government operating.
Our Take
There are still many logistical challenges that need to be addressed to distribute and administer the COVID-19 vaccine, but this is a monumental first step. The current market expectation is that by mid 2021 the vaccine will be widely distributed, and we will finally begin the path of a return to normalcy. This forward-looking optimism appears to be well baked into current market prices. However, it is not inconsistent with what would be expected exiting a recession and entering a new expansionary phase.
2020 will forever be remembered as one of the most challenging years in modern history. The level of human suffering and sacrifice as well as the economic damage from the pandemic will take years to fully recover from. The millions of lives lost, massive scale of businesses closed forever, and estimated $16 trillion in costs to the U.S. alone from lost economic output are just a glimpse of the still mounting damage brought on by COVID-19. The pandemic also exacerbated social and economic injustices that were always present but now have become front and center.
With adversity and destruction comes the opportunity for change through growth and innovation. As an example, COVID-19 has accelerated a technological transformation that was already taking place across all industries with companies trying to quickly adapt to the new landscape to survive. Businesses have shifted to digital platforms to deliver products and services and massive investments into cloud-based computing. There were also innovations in the form of monetary and fiscal policy tools used to reduce the fallout from the pandemic. Although there will eventually need to be an exit plan, it appears to have worked in avoiding a full-blown depression. Despite the level of destruction brought on by the pandemic, and the many challenges we still face, it should not be lost that 2020 is a true testament to the power of human ingenuity and resilience.
