18 Aug MUSING ABOUT A COVID VACCINE AND THE CONVENTION
Perhaps the most imperative question of the day is whether or not a COVID vaccine is at hand. And if so, will it turbo-charge the economic recovery already underway?
Several experts have questioned the likely efficacy of the vaccine that was granted regulatory approval in Russia last week. Even so, there are six other vaccines being developed in the US, and Asia and Europe are now in their and final phase of trials and three more are likely to enter this final stage in the immediate future.
Recently the President of pharmaceutical giant Pfizer told the Washington Post that a vaccine would be available by October.
To write the obvious the speed of development has been remarkable. Typically, it takes about 4 years to develop a vaccine.
In my view, from the perspective of the global economy, the issue is not as simple as whether or not there is a vaccine. There are several factors including the efficacy of the vaccine itself.
As noted the other day, it has hoped that the vaccine will be effective in 65% to 75% of people. The typical flu/pneumonia vaccine is effective in only 50% of people. A measles vaccination, regarding as one of the most effective vaccines developed, is only effective in 93% of people.
Second is the speed in which it is produced and third to whom will first receive vaccination. What will be the impact of economic nationalism? What about charges of racism?
At this juncture the road back to economic normality lies between learning to live with the virus and lowering the potential prevalence of the virus.
Goldman is projecting the unemployment rate will decline to 6.2% by the end of 2021 but states with an effective vaccine the jobless rate can fall to a low “4 handle.” This decline in the jobless rate coupled by money supply growth in excess of 25% and a personal saving rate of around 19% as compared between 7% and 8% from 2014 until this year, as well as another $2 trillion stimulus, Goldman state the odds of an inflationary environment that crushes bonds and “those companies that are barely profitable but highly valued based on future earnings” rises exponentially.
We are living in unprecedented times where the unexpected is always occurring.
Speaking of which, what are the odds of a Trump reelection? Last night was the commencement of the 2020 Democratic Convention. Most polls are suggesting a Biden presidency and if history is to be repeated, Biden should receive a post-convention rise.
Many, myself included, believe the polls are closer than suggested for the simple fact that most are fearful of publicly supporting the President out of fears of being called a homophobic, xenophobic, racist, uneducated Neanderthal. The cancel culture and its woke participants have intimidated the vast majority of Trump supporters into an uneasy silence.
I could argue that if Biden does not receive the customary 14% to 16% post-convention bounce, many could conclude the race is considerably tighter than currently projected.
The largest increase post-convention bounce was Bill Clinton, where he climbed by 30 points in the polls. Vice President Gore was 16 points behind Governor Bush in 2000 but after the Convention he was even. To the bafflement of most, Senator Kerry did not receive a post-convention bounce in 2004.
What will happen today?
Last night the foreign markets were up. London was up 0.42%, Paris up 0.55% and Frankfurt up 0.94%. China was up 0.36%, Japan down 0.20% and Hang Sang up 0.08%.
The Dow should open nominally higher on earnings from several mega sized retailers. The 10-year is up 4/32 to yield 0.67%.