Once Wall Street takes its eye off this week’s volatile trading in small-cap stocks like Gamestop, some might be wondering the harsh reality of the slow economic recovery from the cold-water coronavirus pandemic ran on the U.S. stock market to record record highs in January.
“Any barriers to the virus situation are the biggest drivers of markets,” Tony Rodriguez, co-head of revenue at Nuveen, said in an interview.
The mourners warn that recent delays and shortages in vaccine delivery have begun to take off with market confidence that the economy would recover quickly this year as immunity is starting to pick up in the U.S. population, an expectation that now seems like a very slow process.
The discovery of new variants of the COVID-19 disease across South Africa, the UK and elsewhere has also raised concerns that the US will not enjoy herd immunity even if extensive inoculation is achieved.
“The vaccination process is looking more complicated than expected, falling short both in terms of time and emissions,” said Lindsey Piegza, chief economist for Stifel. “Apart from the new risks that are emerging with further changes in the disease, the economy may be moving back and forth to normal,”
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So far, investors have been willing to overlook any disappointing economic data and uncertain timeline for further fiscal stimulus from Congress while there appeared to be attempts to vaccinate its distribution goes smoothly.
But several U.S. states and metropolitan areas have reportedly run out of the first doses of vaccines, forcing health officials to start dipping into their stock of second doses to distribute them on the air. -slighe. Suffering from a shortage, some vaccination sites had to cancel or postpone thousands of appointments.
In the European Union, vaccine shortages are particularly severe. AstraZeneca AZN,
they told EU lawmakers that they would not be able to deliver on their promises in time, picking up Brussels hacks that suggested the drug dealer could block products from EU factories that were expected to be in the UK.
The growing number of issues surrounding spreads may have added to the volatility in markets this week, according to Mark Haefele, chief investment officer of UBS Global Wealth Management.
The S&P 500 SPX,
the Dow Jones industrial average DJIA,
and Nasdaq Composite COMP,
they all closed around 2% on Friday, leaving all key benchmarks with more than a 3% loss this week after their worst week since October last year.
The trade market barometer of the reflation trade also revealed growing doubts about the U.S. economic path. Yield of 10-year financial note TMUBMUSD10Y,
some time fell as low as 1% this week, after trading as high as 1.18% on January 12 in anticipation of economic growth and slight inflation this year.
Read: Get ready for 10% stock fall, led by the 3 ‘Rs,’ warns Bank of America
The smooth distribution of vaccines is seen as necessary to open up consumer wallets, a key ingredient for a quick return to economic regularity this year, suggested Jim Baird, chief investment officer at Plante Moran Financial Advisors.
In fact, consumer sentiment followed by the University of Michigan fell slightly to a reading of 79 in January, and remains depressed compared to pre-pandemic highs.
But many remain optimistic that the recent vaccine release hiccups will not last as more is agreed and the administration of President Joe Biden is working out the procurement issues.
Accelerated distribution could, in turn, reduce consumer spending and build up growth, said Gregory Daco, chief U.S. economist for Oxford Economics.
Johnson and Johnson JNJ,
a late trial of the single-dose COVID-19 vaccine reported to be largely effective in preventing moderate to severe cases of the disease. And Novavax NVAX,
an early test of the vaccine candidate said it was 89% effective.
Next week, investors will be facing a week of less-than-busy but busy corporate earnings announcements. Amazon AMZN,
GOOGL Alphabet,
Pfizer PFE,
Bristol-Myers Squibb BMY,
and Merck MRK,
among the companies that report results.
A series of first-rate economic data also draws attention. ISM inspections of the services and manufacturing sector are expected in January, along with a U.S. Labor Department earnings report next week.