The news over the last few weeks has been remarkable in its positivity. No, I’m not referring to the alarming surge in positivity rates in our nation, our state and our community. Nor am I referring to the need to positively stay home and stay safe when it’s at all possible. And, I’m certainly not talking about the positively dark period just ahead of us as this unrelenting virus spreads and we are stretched to new limits.
Instead, I’m talking about the positive vaccine developments.
The vaccine news from Pfizer and Moderna is a game changer. After giving their vaccine to tens of thousands of volunteers, about 95% of the first batch of positive COVID-19 infections happened in people who were only given the placebo. These two vaccines appear to provide protection far better than hoped. It’s important to remember this was never a slam dunk. It could have taken years.
I’m optimistic that we’re actually starting to turn the long, long corner of this crisis. What exactly does this mean for the economy and the financial markets? It all depends on the timing of the vaccine and the actions of our politicians in Washington and Lansing.
Until we achieve mass vaccination, parts of the economy will continue to be heavily weighed down. As we’re experiencing right now, public health restrictions will continue to affect the obvious set of businesses that rely on people gathering together.
Since mass vaccination likely won’t happen until well into 2021, more financial help is needed immediately, especially for these employees and these small business owners. Congress needs to deliver a financial bridge that should have been built many months ago. And, our politicians in Lansing need to start speaking with one voice to ensure public health compliance to get through this difficult period. I am hopeful that their childish, political squabbling will be silenced as we experience our biggest wave of infections, hospitalizations and death.
Naturally, what’s next for the direction of financial markets is far less clear. The main culprit for this lack of clarity is in how markets actually work.
Financial markets are real-time “anticipation machines.” In this sense, both good news and bad news is immediately pulled forward and instantly reflected in today’s prices. Since the crisis hit, the virus has produced violent waves of bad news and good news. Uncertainty and market volatility are identical twins.
Financial markets are also real-time “comparison machines.” The central question that’s answered on a daily basis is whether one investment is more attractive than another. On this front, the Federal Reserve has totally gummed up the machine. With yields on bonds and cash downright paltry, it makes many stocks look relatively attractive, even at today’s all-time highs.
This all presents a serious conundrum, both for investors and for our economy. A vaccine is coming and our hospitals are almost full. The political season is over and real leadership is now required. Congress and Lansing, are you listening? The message the virus is sending is loud and clear.
Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com