How is the Vaccine Race progressing and does it really matter?
By Charles Heighton – The London Financial Markets Editor and VP of Trading at King’s Global Markets
Stock markets have been obsessed with the possibility of a Coronavirus vaccine ever since the pandemic exploded into investors' minds at the start of the year. As a result, markets have reacted to every slither of vaccine news and many investors have become armchair scientists.
All active investors must now consider where we currently stand in the vaccine development process. Whoever develops the first approved vaccine may not make much profit on that product, but they will inevitably gain goodwill from the endeavour which may lead to higher profits in the future.
A current overview of the vaccines being developed from Deutsche Bank research
The only vaccine with a chance of gaining approval by the end of the year is being developed by AstraZeneca and Oxford University. Experts appear to be quietly optimistic that this vaccine will work. The delay a few weeks ago was routine and should raise no concerns, as the trials have now restarted. Importantly, experts are suggesting that the vaccine is probably already in production so if it is approved the rollout could be fast. However, even if this vaccine is successful, it faces a large hurdle, especially in the US.
Vaccines can only be useful if enough people decide to take it. It is ridiculous that we have to discuss the possibility of US citizens refusing to take a vaccine for a virus that has killed over 200,000 people. But at the moment, the opposition to a vaccine is scarily high.
Source: PEW RESEARCH CENTER
The above chart is very worrying, as it indicates a sharp fall in US citizens willing to take a vaccine and a sharp increase in those who would not. To reach herd immunity, a minimum of 60% of the population would probably need to take the vaccine. A higher level is obviously preferable. The level needed is also dependent on the success rate of the vaccine; if it is lower than 100%, a lot more people would need to take it to reach the desired threshold.
While the estimated level is 60%, it could be much higher. For example, measles requires 95% of the population to be vaccinated in order to achieve herd immunity. The US is dangerously below this level of uptake if this survey is accurate. It is important to note that surveys can be biased and not precise, but the data here is of interest even if it is not completely representative.
Investors, therefore, need to be aware that making a vaccine is only the first hurdle. The second in certain parts of the world will be getting people to take it. This might be even harder than producing a working vaccine in record time. Some observers have suggested paying people to take the vaccine, but this would be costly and still may not attract enough people. Although, this kind of creative thinking may be needed.
Whatever happens, market watchers should just be aware that a vaccine does not equal herd immunity unless people take it. That might arguably be the biggest challenge of 2020. If the immunity level cannot be reached, then all the hard work that has gone into vaccine production may in the end be worthless.
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