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Cyclical recovery needs success against the virus

Markets wobbled this week after a period looking ahead to a strong economic recovery. Watching vaccination numbers is the best proxy for working out the timings of economic re-openings.

Markets wobbled this week after a period looking ahead to a strong economic recovery. Watching vaccination numbers is the best proxy for working out the timings of economic re-openings.

Charles Stanley

in Features; Fiduciary news


The enthusiasm for shares in sectors and companies that were badly damaged by lockdown and closures has moved ahead of the relaxations of rules and the return of customers. Most people assume both that vaccine rollout will solve most of the problem, and the coming Northern hemisphere summer will, like last year, allow some normality as the virus obligingly subsides.

There has been a nasty second or third wave this winter and early spring in many places. Planned lifting of closures in parts of the US and Europe have been delayed or put on hold in the face of more disease. India is now in the news for too many cases.

As we have been warning, any recovery will be patchy, with different timings in different places depending on the success in containing the disease and the pace of vaccinations. So, it is necessary to keep an eye on the pandemic and governments’ responses to it.

European crisis severe

The latest figures for deaths show the European Union (EU) leading the grisly table, with 645,000, followed by the US (581,000) and Brazil (375,000). These numbers do not take into account their large populations.

If we look at deaths per million people recorded on the world-o-meter, there are now eleven countries where they exceed 2000 per million, mainly concentrated in the Balkans and all in Europe. Hungary and Czechia have been having a bad time recently, and Belgium has again suffered the worst of the western EU countries.

If we look at case numbers, the US, at 97,000 per million, is high. The seven with higher rates are all in Europe, with Luxembourg the highest of the western EU states and Czechia prominent in the east.

It looks as if numbers are now waning generally in the US, probably owing to the recent success in vaccinating many more people. Michigan and New York still have high case figures. The media are worried about the flare-up in India and pressure on their hospitals, though the official published numbers of too many deaths and cases still show low accumulated case numbers and deaths relative to the large number of people.

Vaccines the way forward

It looks as if vaccines are the best way out of the problem, with cases and deaths falling away a lot in places such as Gibraltar and the UK, where most people at risk of serious disease have now been vaccinated.

The combination of summer and vaccines should mean a very vigorous recovery in the US and a good one in the UK. Recovery in some European countries, especially in the Balkans, will be delayed and impaired by the continuing ferocity of the pandemic.

Currently, Czechia has a lockdown extending until 17 May at the earliest, with the closure of schools, non-essential retail, indoor sporting venues and much else – with only limited travel permitted. Turkey has weekend lockdowns. France has a range of controls, at least for April – with a curfew, closures and travel restrictions. Italy has many “red zones” with bans on non-essential movement and closures. India is tightening restrictions, especially in badly affected areas such as Delhi and Mumbai.

The good news is none of the new variants of the virus identified so far is thought to be vaccine-proof, and the pharmaceutical companies are confident they can tweak their products as variations occur.

Watching the charts of vaccination numbers still seems the best proxy for working out the timings of different countries restoring businesses that rely on social contacts. There will be a good cyclical recovery this year in the advanced countries, though this is well known and much anticipated. The pace and timing will differ depending on the strength of the stimulus and the scope of vaccination rollout. The US is ahead of continental Europe as a result.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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