Signs of apparent success from not one, but perhaps several COVID-19 vaccines helped buoyed investor expectations in November, and the market was quick to accept the apparent results of the U.S. Presidential election.
Both Moderna and Pfizer are expected to request FDA fast-track status to speed along the release of their vaccines, and Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, believes that vaccinations could begin in the U.S. later this month for high-risk groups. The rest of the population could begin receiving vaccinations in the Spring of 2021.
This sounds straightforward enough, but enormous logistics issues remain to be resolved. Even if vaccines are widely available by the middle of 2021 in the U.S., it will take much longer to vaccinate a significant population of the country. Inevitably, some anti-vaxxers will object to a vaccine, leaving enormous groups at risk and thereby putting the rest of the population, even those who have been vaccinated, at risk.
Older people tend not to respond as favorably to vaccines as younger people, and there’s no telling how effective any of the vaccines developed so far will be. Will they require a booster? Will they prevent infection or only reduce the severity or length of illness? Will annual vaccination be required? We just don’t know.
Both Pfizer and Moderna’s vaccines require storage at extremely cold temperatures, minus 90 degrees Fahrenheit for Pfizer’s and minus 4 degrees Fahrenheit for Moderna’s, which offers a significant technical hurdle to be overcome for transportation and storage.
Logistic issues aside, questions remain about how quickly many Americans will revert to pre-pandemic shopping, dining, and travel habits. There has certainly been no shortage of people who are seemingly fine with putting themselves and others at risk by flaunting restrictions on public gatherings and mask usage, but the majority (or so I would believe) of Americans have bravely heeded the lockdown calls. Many will continue in this society-friendly behavior as long as necessary, and newly-acquired habits may not be abandoned overnight.
When you factor in the situation worldwide, the timeframe for global recovery from COVID-19 looks even further off. Estimates are that it will take 18 months to vaccinate everyone in the United Kingdom, for instance.
Few pundits are attempting estimates at how vaccines might be deployed in emerging market countries—or who will pay for them. It will take some time for closed borders to reopen all around the world.
These questions have enormous implications for the travel industry both internationally and domestically. Of the nearly 21 million visitors to Disney World in 2019, for example, an estimated 18-22% are international travelers.
Even if vaccination levels reach the 60% minimum that experts believe will produce enough herd immunity to keep hospitalization resources from being overwhelmed, how long will it take for travelers to feel comfortable buying an airline ticket, or reserving a hotel room, or booking a weeklong cruise?
Southwest Airlines CEO Gary Kelly recently remarked. “I think we need to be mentally prepared for a really tough 2021, and then look forward to a much better recovery beginning in 2022, and then maybe the possibility that things are normalizing to [pre-pandemic] levels by 2024.”
While vaccine developments are happening on a regular basis, the prospects of a second and even third wave of the coronavirus swamping medical facilities across the U.S. are already upon us, pushing the timeline for recovery even further into the future.
When it comes to your investment portfolio, I think it prudent to keep in mind that many businesses will still be recovering from the COVID-19 pandemic even into the fourth quarter of 2021, and likely even beyond that for some industries. Maintaining a defensive equities posture is needed now more than ever, so don’t neglect those kinds of companies in your portfolio.
Reprinted from the December 2020 issue of the SmallCap Informer.
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