Wellesley WeeklyWatch – The ‘known unknowns’ of vaccines

24 November 2020

Stock Take

A triple dose of positive vaccine news

As the saying goes, you wait ages for a bus and then two come along at once – last week, the same could be said of coronavirus vaccines. Just a week after Pfizer and BioNTech had announced their results, Moderna revealed that its phase three clinical trials found its vaccine to be 95% effective. And in further promising news, early this week University of Oxford/AstraZeneca said their own vaccine is more effective than expected. With more such announcements likely to follow soon, there is much cause for optimism.

Pfizer and BioNTech described the results of their vaccine as a “great day for science and humanity” – but what does it mean for markets?

So far, so good – the double dose of positive news has triggered a reversal of one of the main trends that investors have witnessed during the pandemic. Since markets fell in March, stocks in sectors like real estate, finance and energy have struggled, while the pandemic-resistant names in technology have surged. But in the last couple of weeks that trend has been upended.

Some fund managers now believe that the market will continue to ‘rotate’ – and ‘value’ stocks will enjoy a resurgence after having played second fiddle to their ‘growth’ counterparts.

Nick Purves of RWC, Manager of the St. James’s Place Equity Income fund, commented:

“I think a bit of recency bias is creeping in for those who predict that the rotation cannot last. The reality is that the last few years, in which one investment style has dominated returns to such a significant extent, is a very rare occurrence. Historically, markets have tended to move from one regime to another and the turning points were often associated with key macro events.”

Known unknowns

Still, there are some major “known unknowns” that must be monitored closely when assessing the short- and long-term impact a successful vaccine might have, notes John Wylie, Head of Healthcare at Magellan, which manages the St. James’s Place International Equity fund.

The first is that it isn’t certain how long vaccines are effective for. Although the leading vaccines have been proven to be effective by their late-stage clinical trials, it’s hard to say for how long people who receive those vaccines will remain immune.

There’s also a lingering risk that COVID-19 could mutate into a form that can’t be prevented by the existing vaccines. The “mink variants” that led Denmark to cull over 15 million minks this month is one such cause of concern.

A challenge for manufacturers

The third “known unknown”, is that producing and distributing vaccines at scale will be a challenge. One consideration is that the vaccines must be transported and stored at low temperatures – at minus 70oC in the case of Pfizer’s. However, the one from University of Oxford/AstraZeneca can be stored at normal refrigerator temperature, which may make it easier to transport over long distances, or to developing economies. Wylie adds:

“The good news is the MRNA vaccine solution [a new technology used by Pfizer’s and Moderna’s programmes] isn’t incredibly technical to deliver from a manufacturing perspective. The bad news is there’s no existing infrastructure at scale yet to deliver it.”

He notes, however, that there is greater manufacturing capacity for the AstraZeneca and Johnson & Johnson vaccines, which have been developed using a more traditional approach. So, if those vaccines get the green light, production could be much higher.

Life before a vaccine

In the meantime, the world’s economies must live with the effects of COVID-19. That means that fiscal stimulus packages, and other forms of government or central bank support, will be important in upholding investor confidence.

Last week, Steven Mnuchin, the US Treasury Secretary, said that the emergency lending facilities set up by the Federal Reserve would not be extended – which tempered some of the market optimism that had been building thanks to the vaccine news. Later this week, UK Chancellor Rishi Sunak is expected to lay out the economic cost of the pandemic in a statement – investors will, no doubt, be glued to the screen.

Christmas comes early for Tesla

Lastly for the week’s news, it has been announced that Tesla will join the S&P 500 index of large US stocks at the end of December. The move will broaden its shareholder base as it gets bought by funds that track the index. Thanks to a surging share price in 2020, Tesla is now the world’s most valuable automotive company, despite producing a fraction of the vehicles of many of its rivals.

Because the company is on a run of five profitable quarters, it now qualifies for inclusion in the index. Yet the announcement breaks several precedents, says Mark Baribeau from Jennison Associates, which co-manages the St. James’s Place Balanced Managed fund (which holds Tesla). He continued:

“It is the biggest stock ever to go into the index, and it is unprecedented to have a five-week lead time between the announcement of a new addition and the effective date. It is also unprecedented for them to consider implementing inclusion as a two-step process.

“Whilst it is hard to say whether the impact of this broadening of the shareholder base will be temporary or permanent, what is clearer is that the company is on its way to becoming the only global automotive player to have continued to expand throughout 2020, with its popular new Model Y only just beginning to ramp up production in the third quarter of the year.”

The announcement meant that Christmas came early for Tesla’s CEO Elon Musk, who saw his wealth swell by $15 billion to $117.5 billion, putting him on course to pass Facebook’s Mark Zuckerberg to become the world’s third richest man.

Wealth Check

Did you know that people who take financial advice are not only more confident about their financial future, but also appear to be better prepared for retirement than those who don’t? 1

These are the findings by the International Longevity Centre (ILC), who published new research last week that provides more insight into the non-financial benefits of an ongoing relationship with a financial adviser.

Here at Wellesley, we often extoll the benefits of taking advice – benefits that extend beyond the financial, but it’s great to see new research in support of this.

Arunima Himawan, Research Fellow at ILC, said:

“In a time where so much responsibility is put on us as individuals to plan for an uncertain future, financial advice has never been more important.

“It’s much too easy to put financial planning off, and even more so when we’re overwhelmed with the day-to-day, we’re worried whether we will make do today, or we simply don’t know where to start. So having someone who can guide us along the way and can point us in the right direction is crucial. It’s not just about maximising retirement income, but about making a plan, feeling in control and having peace of mind.”

Being better prepared for retirement was evidenced by the actions the research participants had taken, including:

  • Spending considerable time thinking about how they would finance their retirement
  • Having milestones in place to ensure that they were on track
  • Focusing on their end goal
  • Building a diverse portfolio of assets.

The report builds on earlier research by the ILC in 2019, which found that individuals who had received professional financial advice between 2001 and 2006 had achieved an average wealth boost of £47,706 across their accumulated pensions and other financial assets.2

But the report also highlighted the continuing problem of the advice gap. Between 2014 and 2016, only one in six people took financial advice, underlining concerns about how many people are unprepared for the financial challenges of later life.


1 Understanding the non-financial benefits of financial advice, November 2020 survey of 32 adults carried out by International Longevity Centre UK.
2 What it’s worth – Revisiting the value of financial advice, November 2019 analysis by International Longevity Centre UK (based on 2014/2016 calculations)
3 Pensions Policy Institute, 2019
4 Analysis of data from Office for National Statistics, Social Survey Division, 2020

The Last Word

“These findings show that we have an effective vaccine that will save many lives.”

Prof Andrew Pollard, Director of the Oxford Vaccine Group

The information contained is correct as at the date of the article.

Jennison Associates, Magellan and RWC are fund managers for St. James’s Place.

The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place or Wellesley Wealth Advisory.

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