As a more-virulent mutant of the COVID strain emerges in the UK, investors across the world are bracing themselves for a yet-another slump in the global markets.
The worries hit markets harshest in Europe, where France has banned UK trucks from entering for an indefinite period. Many other countries also halted flights from the United Kingdom.
However various experts, including those from World Health Organization believe that the coronavirus vaccines from Moderna and Pfizer would likely be effective against the new variant and that it was mutating at a much slower pace as compared to the seasonal flu.
Speaking about the vaccine rollout and its efficacy, Arnab Das of Invesco charts out two scenarios in view of the emergence of the new strain.
“In the short term, it will lead to country-wide and stricter lockdowns and in the long term, nations will have to deal with a more logistical problem at hand which is of distribution after a couple of dump-shots of the vaccine against the mutant,” he points out. He also adds that if the strain lasts for over two months, it could thwart the economic recovery and will call for extended monetary stimuli in the UK and continental Europe.
Meanwhile, a long-sought stimulus in the United States was cleared by the Congressional leaders yesterday and is now slated to reach Donald Trump’s desk. However, markets are shrugging off stimulus cheer and positive vaccine developments have now taken a backseat in the investors’ minds.
“This new strain gives investors a perfect excuse to book some profits. I see a flight to quality that the investors should hop on because no sooner than later, we’ll be back to the usual cycle of watching how rapidly the global economy recovers,” believes Geoff Dennis, an independent emerging markets commentator.
With Christmas around the corner, the new strain adds a lot of uncertainty but markets are also weighing the benefits of the whopping stimulus deal and optimism over a vaccine-fueled rebound in economic growth.
Global investment strategist Jonathan Schiessl explains that markets have been forward-looking throughout 2020 and that investors will be able to get through this hurdle whose implications are not fully-known as of yet.
“There definitely won’t be a smooth and straight-line story on this. For the next 4-5 months, the reopening and recovery process is going to be choppy and in troubled waters. However, in the next couple of weeks, mass vaccine rollouts will certainly be a positive,” says Schiessl.