Wall Street Week Ahead: COVID-19 Vaccine Adoption Rates Are “Wild Card” for US Equities Rally

    NEW YORK (Reuters) – This month’s news of three promising coronavirus vaccines helped push the Dow Jones Industrial Average above 30,000, but some investors worry slow vaccination rates could undermine the economic recovery expected for the next. year.

    Overall, 58% of Americans said in a Gallup poll that concluded on November 1 that they would get vaccinated, increasing from 50% that were available in a September survey. 42% said they would not be willing to get a vaccine, citing reasons such as rushed development timing and safety concerns.

    Delays in vaccine distribution or widespread refusal to be vaccinated would allow the virus to continue circulating longer and delay the development of herd immunity, which occurs when enough people in a population have some form of protection that prevents the easy spread of a disease.

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    “Making sure the world will return to normal by mid-next year because a vaccine is available is an aggressive prerequisite,” said David Albrycht, chief investment officer of Newfleet Asset Management.

    “There is a light at the end of the tunnel, but we’re not sure how long it will be,” he said, citing uncertainties including whether a vaccine will be free or covered by insurance plans, its launch and its public acceptance rate.

    Citi Research wrote in a statement Monday that herd immunity will not form until the end of 2021, increasing global gross domestic product growth by just 0.7% next year compared to an estimated 3% increase in the year. 2022 with increasing vaccination rates.

    “The answer is not the vaccine; are vaccinations. The vaccine must be widely adopted and accepted for it to work, “said Ernesto Ramos, head of actions at BMO Global Asset Management.

    The U.S. Food and Drug Administration is likely to grant approval in mid-December for the distribution of the vaccine developed by Pfizer Inc and German partner BioNTech, and some healthcare professionals may start getting shots a day or two later, Dr Moncef Slaoui, chief Science advisor to the US government’s Operation Warp Speed, said Sunday.

    About 70 percent of the US population of 330 million are expected to be vaccinated to gain herd immunity, which is possible by May, he said.

    Ramos said these estimates may be overly optimistic and that the economic benefits of vaccinations won’t be evident until the second half of next year, raising the chances that the recent US economic slowdown could get worse.

    Investors will receive the latest US economic snapshot with data next week, including the monthly employment report. Economists interviewed by Reuters expect December 4 employment report to show unemployment fell to 6.8% from 6.9%, still well above 4.5% in March, before much of the US economy went into lockdown.

    Targeted vaccinations could boost the economy even with delays in widespread adoption, said Jonathan Golub, chief US equity strategist at Credit Suisse Securities.

    “Successful vaccination of the elderly and frontline workers could accelerate the renormalization process well before herd immunity is achieved,” he said. The S&P 500 could reach 4,050 by the end of 2021, an increase of around 13% from its current level, he estimated.

    While vaccine adoption rates are a “wild card,” their availability eliminates the risk of another widespread economic freeze, said John Buckingham, portfolio manager at Kovitz Investment Group.

    He remains optimistic about the companies that will benefit from an economic recovery, including JPMorgan Chase & Co, Foot Locker Inc and Whirlpool Corp, although the US economy remains uneven in the coming months and coronavirus cases continue to rise.

    The United States registered its 12 millionth COVID-19 case on November 21, and health experts have warned that Americans traveling for Thanksgiving are likely to dramatically increase the number of cases.

    “If the situation were reversed and I had good data on COVID cases and hospitalizations, but the vaccines were flops, the stock market would be cratered,” Buckingham said.

    Reporting by David Randall; edited by Lewis Krauskopf and Richard Chang

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