U.S. Ready to Ramp Up Covid Vaccine Distribution
While US stock indices are hitting records, some investors are seriously worried about market turbulence, which could erupt if problems arise with the mass vaccination of the population against COVID-19..
Hedging can be seen on Cboe Volatility Index futures expiring in March.
Uncertainty about vaccination has also helped raise the so-called, «fear indicator» (VIX) is above its long-term average of about 20 pips, even when S&P 500, Dow Jones Industrial Average and Nasdaq Rise To Record Highs This Week.
Investors said they will keep an eye on how close the president is Joe Biden could approach the target of 100 million doses of vaccine in the first 100 days of his presidency. The day before, he signed decrees aimed at expanding testing and vaccination..
«The next few months will focus on serum adoption and labor market recovery. Failure can have a very negative impact on the entire country», – said Stacy Gilbert, derivatives portfolio manager at Glenmede Investment Management.
Breakthroughs in COVID-19 vaccines and speculation that life will be back on track by summer helped boost the S index&P 500, which is up more than 70% from its March lows.
Banks’ shares and many small and large companies also rose.
The VIX, in turn, has been drifting since March. That month, the index climbed to a record high of 82.69 after years of modest fluctuations in the US stock markets.. Massive monetary and fiscal stimulus, along with optimism for economic recovery, helped curb the fear index.
However, risks in the global vaccination process could strengthen the position of investors seeking to take profits, potentially leading to new market volatility.. Fund managers in a recent study by BofA Global Research identified potential vaccine distribution problems as a top market fear that could cause large asset price volatility..
Some investors are keen to take advantage of high volatility expectations, preparing for possible turbulence in the future..
Arnim Holzer, Correlation Defense Strategist EAB Investment Group advises clients to sell February options on short-term series futures «B» Barclays iPath ETN, a VIX-linked exchange note.
For a significant opening of the economy this summer, vaccinations should be completed for most priority populations by the beginning of the second quarter, and access for all citizens should take place by the end of June, said Matthew Harrison, biotech analyst at Morgan Stanley.
«The overwhelming majority of incoming questions were related to the pace of deployment of mass inoculation. It is obvious that investors are trying to understand how this will affect the market», – he said.
To date, about 15.1 million people have received at least one dose of COVID-19 vaccine in the United States – less than the former president’s goal Donald Trump vaccinate 20 million Americans by the end of 2020.
According to the Centers for Disease Control and Prevention, the total number of deaths from COVID-19 in the country has already exceeded 400 thousand..
Brad McMillan, Chief Investment Officer, Commonwealth Financial Network, willing to be patient for now.
«This is a more complicated path than we thought, but everyone who has actually studied this issue expected this. Markets may start to worry if vaccinations are not fully rolled out by the end of the month.», – he thinks.