A Covid-19 vaccine is a highly anticipated scientific breakthrough which we may see in 2021. Learn the potential impact of such news on the market and economy once approved for people around the globe.
A World Racing for a Vaccine
One scientific achievement highly anticipated by mankind right now is the discovery of a thoroughly vetted vaccine for Covid-19. It is expected to signal the beginning of end of the pandemic. It would also be seen as a confidence booster for investors as a precursor to economic recovery. However, Wall Street investors are likely to instead take a “look and see” approach.
As of late August, the official numbers for cases from Covid-19 worldwide have hit over 23 million with 800,000 deaths. This is startling data considering it has been less than year since the onset of the outbreak in December 2019 that was later declared a pandemic in March 2020.
On the economic front, global GDP has declined by -4.9%. Malaysia has had its worst ever GDP contraction since the global financial crisis with a -17.1% GDP contraction. Other countries are also seeing a GDP contraction with US -32.9%, UK -21.7%, Mexico -18.9%, Italy -17.3%, Philippines -16.5%, Singapore -13.2%, and Indonesia -5.3%.
After Malaysia experienced economic output loss equivalent to RM69 bilion in nominal value, we hope for changes in the economy and positivity for the stock market once a working vaccine is available. A recovery is expected even though it will likely be bumpy.
Currently, most countries are experiencing some sort of recovery phase in the 2nd to 3rd quarter. Despite the continued spread of the pandemic and fears of subsequent waves, most economies cannot afford another lock-down. Many countries are also wary of an economic cliff as stimulus packages and loan moratoriums end.
On a more micro level, companies should be able to navigate these difficult times as long as economies remain open and companies adapt to the times. However, there remains concerns of high unemployment and shifting customer behaviour with reduced spending. Therein lies the risk of economic stimulus failure and deflation.