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What happens when the pandemic is over?

by | Nov 9, 2021 | Investing

Talk about a game changer. Pfizer just announced a pill that promises to prevent up to 90% of Covid-19 deaths.1 It comes just weeks after Merck announced its own drug to treat patients with the virus that upended the world. The UK has already granted conditional authorization of Merck’s antiviral pill.2 Health Canada, as well as regulators in the U.S. and EU, are reviewing it.

Even before these developments, leading disease experts were talking about the beginning of the end of the worst of Covid — at least in parts of the world with high vaccination rates and where wide exposure has built up natural immunity. The U.S. and Canada tick both these boxes. Globally, the World Health Organization anticipates the virus will be under control by the end of 2022.3

Dr. Scott Gottlieb, a Pfizer board member and former Commissioner of the Food and Drug Administration (FDA), believes it could be much sooner for the U.S. In an interview with CNBC, he said the pandemic could be transitioning into an endemic phase by January.4 It stands to reason the same could be true for Canada, where nearly three quarters of the population are fully vaccinated.5

This is great news for many reasons. When it comes to what a return to pre-pandemic life means for the markets, here’s what investors need to know:

This is a green light for the stock market. Almost immediately after Pfizer announced the efficacy of its new pill, its own stock shot up 11% .6 It wasn’t just the giant drugmaker that benefited. Reopening stocks such as airlines, hotels, retailers, all got a boost. All three major stock indexes (The Dow Jones Industrial Average, S&P 500, and Nasdaq) moved higher, although this wasn’t just about Pfizer.7 The Labor Department in the U.S. reported better than expected job numbers (531,000 jobs were added to the U.S. economy in October)8 and unemployment rates dropped to 4.6%.9 All of this paves the way for a very good holiday season and the markets finishing 2021 strong.

Simply put, it’s a win and a good time to invest. My best advice: be selective. Just as stocks related to the economy reopening are on the rise, stay-at-home stocks are taking a hit. On the day of Pfizer’s big announcement, shares of Peloton, which makes at-home exercise equipment, plummeted 30%.10

Looking a little further into the future, if the disease experts and Dr. Gottlieb are right, we could see interest rates increase as early as spring 2022. For people who have borrowed money, expenses are going to rise, so be mindful of spending. However, for investors, and particularly retirees, rising interest rates can be a good thing, provided the economy is growing, too. Right now, inflation is sitting at 4%11 in Canada while 10+ year bonds are sitting at 2%12 and GICs at 1.5%13. Higher interest rates will allow investors to put their money into lower risk investments and generate returns that best inflation.

Speaking of inflation, Goldman Sachs estimates that 80% of the rise in inflation rates is the result of supply chain issues14, which in turn are caused by the pandemic. If big pharma’s new antivirals deliver what they promise, supply chain issues should also go away and inflation rates will return to more normal levels.

The new covid treatments may also bring at least some of the millions of people who have opted out of the workforce during the pandemic back to work. In August alone more than 4.3 million people quit their jobs, according to the U.S. Labor Department.15 For those who left because of health and child care concerns, the higher vaccination rates and new treatments could help them return.

We have spent the last 19 months fighting Covid-19. Now, finally, we’re coming out the other side and getting ready to live again. I’m excited.

Call Me or Email Me
My approach to investing is straightforward. I study the markets, global economies and what’s happening within industries to be in a position to best help my clients find good quality investments that will help them meet their goals. I build custom portfolios for each client. I welcome you to call me at 416-332-3863 or email me at allan@allansmall.com.

References

      1. Pfizer board member Gottlieb says the Covid pandemic could be over in the U.S. by January, CNBC
      2. U.K. authorizes Merck antiviral pill, 1st shown to treat COVID-19, CTV News
      3. When will the pandemic become endemic? Disease experts eye beginning of the end, CTV News
      4. Pfizer board member Gottlieb says the Covid pandemic could be over in the U.S. by January, CNBC
      5. COVID-19 vaccination in Canada, Government of Canada
      6. Pfizer shares soar on positive test results for Covid pill, CNN
      7. Reopening Stocks Lead The Market Higher After Strong Jobs Report, Pfizer Announcement, Forbes
      8. The Employment Situation — October 2021, BLS
      9. Reopening Stocks Lead The Market Higher After Strong Jobs Report, Pfizer Announcement, Forbes
      10. Reopening Stocks Lead The Market Higher After Strong Jobs Report, Pfizer Announcement, Forbes
      11. Canada’s inflation rate hits 18-year high, puts focus on central bank rate policy, Reuters
      12. Selected Bond Yields, Bank of Canada
      13. GICs Rates, Ratehub
      14. Biden announces 24/7 L.A. port operations to ease supply chain jams, CBC
      15. A record 4.3 million workers quit their jobs in August, led by food and retail industries, CNBC