An Oxford Harriman & Company Commentary

Expected Increase in Virus Cases vs. Positive Expectations for a Vaccine – A “Risk On” Quarter

Welcome to 2021! We are nearly a month in and unfortunately, not much has changed. We are still social distancing, parts of the economy remain closed, and COVID-19 cases continue to rise. The vaccine rollout has commenced, albeit with delays, confusion and difficulty delivering early doses to those permitted to receive the vaccination.

We are not going to write a recap of 2020. We all know the story, and even though the year ended on a positive note for our investments, we would like to keep last year in our rearview mirror. We could write an entire book about March alone!

On to the fourth quarter.

Two conflicting themes defined the fourth quarter: a resurgent virus and positive vaccine data. As we ended 2020, coronavirus cases continued to increase in the U.S. and in Europe as many appeared to grow weary of social distancing and took risks during the holidays. State and local governments responded by slowing reopening plans and introducing new restrictions. Overwhelmed hospitals again faced capacity issues, and public health officials warned the winter months would be dark.

Investors’ attention focused on vaccine development as case counts surged. Optimism was high as markets intently watched multiple vaccine candidates start late-stage trials. Investors’ optimism was ultimately rewarded in early November when Pfizer and Moderna both released encouraging vaccine trial data. Both companies asked for and received emergency use authorization and vaccine distribution commenced as we finished 2020.

The positive vaccine trial results represented the first step toward reopening the economy. Investors overlooked the virus’s winter resurgence and the “risk on” theme resumed as we finished the year. Global stock markets rallied, as the reopening phase suddenly appeared within sight.

 

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