In recent weeks, market sentiment has stuttered as investors evaluate the cases of the Delta variant of the Covid-19 virus. However, vaccines are proving to be highly effective against it. In countries with a high proportion of vaccinated adults, the number of infections resulting in severe cases (leading to hospitalisations and deaths) is now significantly lower than before vaccination programs had begun in earnest. Whilst this remains a challenging time for global health authorities and the human impact of the virus’ spread must not be overlooked, we believe that vaccine roll-outs could drive the market impact of the Delta variant’s spread, particularly when it comes to selecting across global equity regions.
We believe re-opening will continue in many developed countries - albeit with bumps along the way - supporting economic growth and increased consumer spending. This should be especially noticeable in countries that have had a quicker and more complete vaccine roll-out, such as the UK, where Fidelity Solutions & Multi Asset takes a positive view on the UK equities. At the same time, the team’s latest core views include a slightly more positive outlook for US equities, moving from neutral in previous months. Overall, the team takes a generally more favourable view on developed equity markets versus emerging markets and Asia Pacific ex Japan, where vaccine roll-outs are yet to gain as much traction, or are likely to have less impact due to already-contained pandemic situations.
Of course, the global vaccine roll-out is not the only dynamic shaping global markets, and we know that the summer months often bring a period of consolidation. This summer, we are moving from early- to mid-cycle, and are past ‘peak accommodation’ by central banks. As a result, the team has pared back some risk overall, remaining highly selective in our risk-on positioning, watching for better opportunities to add risk over the coming months.
UK data suggests vaccines help prevent instances of severe Covid-19, despite high infection rates
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Source: Mathieu, E., Ritchie, H., Ortiz-Ospina, E. et al. A global database of COVID-19 vaccinations. Nat Hum Behav (2021), 22 July 2021.
