Is The Vaccine A Shot In The Arm?
Mass vaccination is in full swing in many countries. What impact will it have on global markets? Pie Funds CEO and founder Mike Taylor explains.
5 October 2021
The Covid-19 pandemic has hugely changed the business – and the investing – landscape.
Some sectors have barely survived, while others have thrived. And entirely new sectors have emerged completely.
Places like the UK and the US are now well into their vaccination roll-out, with many other countries following. Mass vaccination, and herd immunity through it, means borders will slowly open and global economies will reopen.
The business sector will change yet again when people are able to get out and about more.
The new recovery phase
In the first phase of the pandemic there was a surge in demand for goods, particularly products that would help people work and live extensively from home more easily.
That meant a boom in things like meal-kit delivery, digital tools like Zoom, office set-ups, and leisure items like new pets and bikes.
We often call these companies ‘Covid beneficiaries’. Some of these will still be in demand for a long time because our habits have changed.
For example, many people have now added cycling into their everyday routine, or perhaps still work from home a few days a week using digital tools.
Vaccination will usher in a recovery phase and this will release pent-up demand for services and leisure.
Don’t forget that many countries are still in and out of strict lockdowns, and some shops have been closed for a long time.
Who will benefit?
What sectors will benefit from mass vaccination? I’d suggest things like travel, entertainment, restaurants, and activities where people interact socially in groups will benefit most.
If they’ve survived until now, they’re expected to thrive. Many investors expected this move and have already transitioned their portfolios to invest in sectors and companies they think will benefit from the reopening trade.
We should see things like shipping delays and the ease of imports and exports improve, too.
The global economy will pick up
It’s still unclear how much of a boom the global economy will see, but economists estimate that 2021 and 2022 should be the biggest years for growth since the Global Financial Crisis (GFC) of 2007-08.
Also, central banks are mindful that the recovery from the GFC took over a decade.
This time, they’re focused on providing enough stimulus (think cash injections) to ensure that economies get back to full employment and that inflation can pick up from very low levels.
Spotlight on wealth
So far, wealthier countries have been in a better position to buy vaccines than poorer ones, and this may have an impact on markets.
But the 2009 swine flu epidemic in Asia, which affected many poorer countries, didn’t slow countries’ economic growth rates.
So, I expect that lower vaccination rates in some poorer countries won’t hamper the global recovery this time.
As well, there’s the global ‘Covax’ scheme, which hopes to make sure vaccines are shared fairly across all nations.
And we’re helping here in New Zealand too, providing for our neighbouring islands, like the Cook Islands.
What about travel and tourism?
Which brings us to travel. Many surveys suggest that once they’re vaccinated, people will feel safe to travel overseas.
The travel and leisure sector isn’t dead. I’d expect the trends before Covid will recover gradually over the next two or three years.
New Zealand is seen as a haven to many, so I think travel to our country will boom once borders open and travellers are vaccinated.
Likewise, many Kiwis will likely be excited to go overseas to visit family and friends, for business and leisure.
Our new bubble with Australia is a great start, and over the next few months it’ll give us a good idea how people feel about travelling abroad.
I’d expect our borders to reopen once we’ve reached herd immunity from vaccinations, which is estimated to be the end of this year.
Right now, I still think that the first opening will be restricted to countries that are either within our bubble at the time, or to travellers who have proof of vaccination at departure.
Mike Taylor is the CEO and Founder of Pie Funds. You can view Pie Funds’ disclosure documents on the Pie Funds website. For personalised financial advice, please speak to a financial adviser. Correct as of 19 April 2021.
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