Vaccine is first major step back towards normality

Paul Craig, portfolio manager at Quilter Investors, comments on the latest developments in the search for a Covid-19 vaccine…

The fact that the world was hit with an unknown virus and within a year has produced what looks to be an effective vaccine is remarkable. This announcement is hugely positive news and is the first major step back towards normality for those worst-affected by Covid-19.

However, this vaccine is not a silver bullet. Many of the issues facing developed economies now are structural and a vaccine is not going to prevent the large scale unemployment we are likely to see as a result of the lockdowns of earlier this year.
For now, however, it is a positive and the companies benefiting certainly represent a ‘reopening trade’ of some sorts. This means the laggards of the past few months, the likes of hospitality and airlines, are up significantly, while the mega-cap tech stocks are flat. Indeed, some winners of the pandemic are seeing underperformance now as demand for them is likely to be hit. It is also hugely positive news for European economies, which have been hit hardest by the pandemic, so it will be interesting to see if this changes their fortunes over the longer-term and be seen once again as investible.
There are still some questions to be answered around the rollout of this vaccine, and with the US political uncertainty not quite finalised yet there remains some risk still on the table. But for well-diversified investors, they will do will to stay focused on the middle 80 per cent of companies rather than glamour investing and over the long-term are likely to benefit the greatest from the new environment.