So far, Israel has vaccinated about 30% of its population and the UAE about 20%. If sustained, they could reach the threshold for herd immunity by mid-year, JPMorgan says.
“Will enough divergence open up with respect to herd immunity across countries to render this issue tradeable across markets?
Probably,” strategists led by John Normand wrote in a Jan. 8 note. “Those countries that return to pre-crisis levels of activity most quickly due to some combination of stimulus and vaccine distribution should witness the most upward pressure on their interest rates and currencies.”
While Israel and Dubai are tantalizing examples, the case for growth fueled by vaccinations in larger economies is murky, according to Michael Herzum, who runs macro strategies at Union Investment in Frankfurt.
“It is difficult to isolate these effects from other market drivers and therefore makes it difficult to play it on a country-by-country level,” Herzum said. Even so, he’s building vaccination rates into his cross-asset allocation decisions.
In Britain, where the first citizen outside of a trial received the coronavirus
vaccination on Dec. 8, the FTSE 100 benchmark has outperformed peers in Europe even as its population suffers through a third national lockdown to quell a resurgence of the virus and a new fast-spreading variant. Vaccinations could pave the economy’s path to recovery and further lift the nation’s stocks, according to Herzum.
“U.K. equities could be in a good position very soon as the U.K. probably reaches herd immunity much faster than the continent due to much better progress on vaccinations,” he said. “This could result in a big swing in economic activity once Covid-19 related restrictions are lifted.”
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