Second wave infections are still rising in several European countries. However fatalities are not rising at the same pace as in wave one, partly because of progress with treatments and also more hospital capacity. Recent vaccine news from pharmaceutical companies are also positive-looking towards the second half of 2021. Lockdowns are likely to be for shorter periods than 2Q and measures are softer.
Encouraging vaccine news has boosted confidence in Citi’s base case views. The Citi Private Bank Global Investment Committee has further increased overweights to global equities, adding to developed markets (ex US) and emerging markets (ex China).
On 9 November, pharmaceutical company Pfizer announced better-than-expected vaccine results, with “90% or more” efficacy in blocking COVID-19 transmission, according to the company. Citi analysts see the vaccine news as a first major advance toward a post COVID-19 world economy.
Looking ahead, Citi analysts believe that the arrival of an effective vaccine is likely to become the more important news than the result of the US Presidential race.
At time of writing, Former Vice President Biden has 213 electoral votes compared to 118 for President Trump (source: Bloomberg) but it looks too early to call the election. The near-term remains subject to downside risk and continued volatility in equities markets on pending US political developments, but Citi analysts think this period of uncertainty could change with the first news of an efficacious COVID-19 vaccine and the election outcome.
Markets no longer anticipate a protracted battle to determine the US Presidential election results. As we saw in 2016 amid the UK’s Brexit referendum and US Presidential election, any kneejerk reaction to results in the day or days after may not necessarily be indicative of longer-term trends. Markets are likely to sooner or later move in the direction of impending fundamentals.
