Same old, or a new, story?

Markets have been propelled by a fairly simple story in the past nine months, split across two themes. First, market prices have been driven by the expectation that vaccination will once-and-for all allow us to put the virus in our rearview mirror, and secondly, that fiscal and monetary policy will remain primed for support. This story was always going to be challenged at some point in 2021 as vaccination programs reach their climax and policymakers inevitably begin to consider what degree of stimulus that is needed in a world not in the grips of a pandemic. And wouldn’t you know it; here we are. As far as the success of the vaccines is concerned, it is crucial to remember that the final path to a full reopening is as much a question of politics as it is about epidemiology. Indeed, at this point, I am inclined to believe that it is mostly about politics. This isn’t surprising. Cases were never going to zero—at least not as long as we keep testing at the rate we’re doing at the moment—and new variants were always going to elude the vaccines, one way or the other. 

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