Economic repercussions of the pandemic will likely be with us even after a vaccine is widely distributed

• The problem at hand for investors is not politics, or –at this point- unapproved vaccines,  but the ongoing global second wave of the pandemic
• Investors can ill-afford to ignore the inevitable and not entirely predictable time lapse between now and the point in the future when Covid-19 will be effectively behind us
• The economic repercussions of the pandemic, ranging from high unemployment to financial system stress and a very large debt overhang, may well be long with us even after a vaccine is widely distributed

“The pandemic has so dominated our personal lives, in fact more so than the actual course of risk assets, that anything which takes the focus off the issue, be it sensational elections in the US or staff reshuffling in Downing Street, is treated as a welcome break, especially as new cases rise and the mortality curve may well follow.

“However, the story for investors is the global second wave of the pandemic. Despite some good R&D news, investors can ill-afford to ignore the inevitable but not entirely predictable time lapse between now and the point in the future when Covid-19 will be effectively behind us. In that time period, the stress on the economy might become extreme.

“The fact is of course that successful vaccination trials suggest that there’s light at the end of the tunnel, encouraging more fiscal and monetary support by policy makers to stave off another protracted bear market and keeping portfolio managers upbeat.  However, it is equally fact that the economic repercussions of the pandemic, ranging from high unemployment to financial system stress and a very large debt overhang, will likely be with us even after a vaccine is widely distributed. By throwing all they have to alleviate pain now, economic systems, based on the allocation of finite resources, will be very challenged to effectively deliver growth in the years after the pandemic. The consequences on the projected cash flows of firms, small or large, are broadly unknown, and thus investment managers should not relax despite the good vaccine news or the very wide policy support.”