BanyanTree Investment Group was recently featured on Ausbiz where Fund Manager Zach Riaz offered his views on the recent market correction and the periphery services that will see increased commercial activity once a COVID-19 vaccine is developed. Here are this thoughts.

Vaccine timeline

Clearly this will have a material impact on investor sentiment, the health outcome is another conversation. University of Oxford/AstraZeneca is the horse that most are backing, which makes up approximately 35% of total pre-ordered doses globally.

4 major vaccines are expected to begin mass production before the end of 2020 – including AstraZeneca, Sinopharm (China), Pfizer (EU/US). Apart from this the ability to distribute the vaccine will be logistical effort – International Air Transport Association / DHL estimates 8,000 747 cargo aircrafts / 15,000 flights are required to deliver doses to the masses. And that is one dose – most vaccines in development will require two. Further, they need to be delivered under certain conditions – temperature requirements.

U.S. markets have downside risks

The U.S. markets are at a peculiar crossroads – U.S. elections and U.S. fiscal cliff represent meaningful downside risks. History suggests markets have traded lower in and around U.S. elections more often than not. From a tactical asset allocation perspective investors could mount a reasonable argument to be tactically underweight the U.S. market.

There is still no agreement on the new stimulus package in the U.S. and we hear that there is the possibility of a no stimulus deal until after the election (this could ofcourse be just political grandstanding). Despite all the central bank liquidity, this is a real issue given markets have become so use to fiscal sugar hits and even U.S. Fed Chair Jerome Powell noted that fiscal policies were required to stop the economy from stalling.

Whilst previously the Republicans were happy to consider $1 – 1.5 trillion dollars in further stimulus measures, they now want to pull this figure lower given the strength in the economic data.

Europe

Hard Brexit concerns are starting to reemerge, although this is more a UK issue versus a broader Euro issue.

 

This update was provided by BanyanTree Investment Group.