Last week, Pfizer (and their partners) released preliminary results from their stage 3 vaccine trials. While there is still a lot of data to collect to confirm the preliminary findings, Pfizer suggests that the vaccine could have an efficacy rate of 90%. Monday, Moderna announced that they have seen their vaccine be 94.5% effective against COVID-19. Stated differently, if we were to assume that the vaccine was given to everyone in this country on January 1, 2020, total COVID case counts might be as much as 90 and 94.5% lower than they are today respectively. This is certainly very exciting news. Stocks roared the days of Pfizer's and Moderna's press releases, led by some of the sectors that have struggled the most in 2020 (energy, financials, etc). Some of the stocks that have outperformed the overall market in 2020 (Microsoft, Amazon, etc) have seen share price declines since the announcement (i.e. reallocation into cheaper sectors of the market). Of course, this is a short term phenomenon at the moment, but it could be a harbinger of what is to come once we have more clarity with the vaccine.
There is still work to be done before the vaccine can be distributed on a wider scale.
- For starters, more data needs to be collected to ensure that the vaccine is as safe and is as effective as preliminary results indicate. This will take some time.
- Distribution will certainly have its challenges given the potential demand for the vaccine as well as some of the special delivery and storage requirements. For example, hundreds of millions of doses will need to be produced, a process that will take time. Also, the vaccine is very sensitive to storage conditions, meaning that many transportation companies, hospitals and healthcare facilities will need to acquire special refrigeration units before the vaccine can be delivered.
Some analysts expect final approval from the FDA by the end of Spring 2021 (if not sooner). Assuming large scale production is underway by the spring, it may take another few months for the vaccine to be distributed on a wider scale. Nonetheless, it appears that we are beginning to see the light at the end of the tunnel. If everything goes as well as it could, herd immunity in the US could be achieved before fall 2021.
Vaccines may be available to some people soon
While we wait for the FDA's final approval, there is an expectation that the FDA will provide Emergency Use Authorization of the vaccine relatively soon. This means that the vaccine may be available before the end of this year for some folks. Health care professionals, emergency responders, and those most susceptible to the virus will be given priority at first. Once the FDA gives its final approval, the vaccine would be available at a larger scale, with certain cohorts given priority over others at the outset.
There are other vaccine candidates that may be available next year, too
Pfizer and Moderna are not the only firms working on a vaccine candidate. There are a few other firms with vaccine candidates in late-stage trials that hope to have final FDA approval in mid to late 2021.
What does this mean for the economy and capital markets?
Economic growth is driven primarily through business and consumer spending....and business and consumer spending is highly correlated with confidence. Simply put, the more confident businesses and consumers are about the future, the stronger the economy is likely to grow, the more profitable companies are likely to be, and the more jobs are likely to be available. As we saw earlier this year, a significant decline in confidence about the future can spell disaster for the overall economy and capital markets. On the other hand, a big boost to confidence can provide the jolt our economy needs. Given how challenging 2020 has been, it is exciting to think about the effect a vaccine would have on confidence across our society.
To be clear, it will still be some time before we may see tangible benefits from the vaccine. As virus counts continue to grow, it appears that the next few months are going to be tough. But, 2021 looks like it might be a whole heck of a lot better than 2020.