Stocks reach all-time highs on vaccine optimism. The NASDAQ 100 and the S&P 500 are up 1.75% and 1.39%, respectively, with financials, utilities, and communication services being the largest gainers. The Dow Jones is also up around 1$ - however, still below that 30,000 mark. Across the ditch, cyclical in the UK was getting a bid, up around 2% after Goldman Sachs called the UK a buy.
Pfizer is stated to have shipped their “first mass air shipment” of their Coronavirus vaccine. United Airlines carried Pfizer’s Coronavirus Vaccine from Brussels to Chicago O’ Hare international airport on Friday. Therefore, some Americans could get their first dose of the vaccine in a few weeks if the US DFA approves the vaccine without any hiccups. As stocks advance, we saw further dollar weakness, with the DXY down nearly 0.6%.
With the great bounce back from equities, some analysts warn that it will not be like this for the foreseeable future. Yuko Takano, equities portfolio manager at Newton Investment Management, stated that investors should not expect gains “in a straight line from here” and that “even if Covid-19 vaccines are approved swiftly, governments still face the tasks of administering the jabs… [with the] winter [coming], it ‘s getting cold so we’re going to see an ugly next wave of the virus hitting a lot of developed countries.”
This is true, especially with Christmas coming up; some countries, especially in Europe, want to ease up restrictions to give some reprieve for businesses. In England, the government is allowing shops to stay open for 24 hours a day in the run-up to Christmas and in Jan. However, this is a Bold move considering the UK is still recording cases higher than their initial first wave. For reference, New Zealand eased up restrictions after weeks of having no community case transmissions.
With stocks at all-time highs, alongside Goldman Sachs calling the UK a buy pre Brexit, this seemingly innocent policy to reopen shops for Christmas is most likely detrimental to the UK’s economy. This shows the UK Government insists on balancing economic damage against human lives, which is somewhat a self-fulfilling circle of deaths and a worse economy.
There is evidence across the world that this method of recovering from the economic damage from the Coronavirus does not work. We saw this in Australia – in which a second outbreak caused Melbourne to lockdown for near as makes no difference, eight months. Only after a strict lockdown with no community transmission were they able to open up confidently without another lockdown. If the UK proceeds with opening up in Christmas, this will cause further economic damage with other lockdowns, which will outweigh the economic activity for Christmas. I am afraid I have to disagree with Goldman’s buy recommendation for the UK.