Boris Johnson hailed a ‘significant milestone’ over the weekend as the UK recorded 15 million Covid vaccinations, cementing a record for delivering one of the most successful immunisation programmes in the world. More than 25% of the adult population has now received at least one jab, with England and Wales meeting their target of reaching the top four priority groups, including the over-70s, by 15th February:
Another 17 million vaccinations are planned by the end of April, covering 99% of those most at risk of dying from Covid, with all adults to be offered a first dose by the autumn. As it should, attention has now turned back to the need for rapid economic and societal normalisation, with 63 MPs signing a letter to the Prime Minister saying there was ‘no justification’ for not lifting all Covid restrictions by the end of April when the Government hopes to have vaccinated everyone over the age of 50.
An argument could be made that the UK’s reopening is too cautious given the vaccination numbers above, coming amidst confirmation that 2020 saw the worst GDP outturn for 300 years – a drop of 9.9%:
While a poor result, this outcome is better than some apocalyptic predictions from the spring and summer of 2020; positively impacted by GDP growing at double the pace expected in the fourth quarter, showing signs of resilience to Covid restrictions. The economy grew by 1% from October to December, including a 1.2% month-on-month expansion in December alone, driven by strength in the construction sector and government spending.
The Bank of England’s latest forecasts suggest that the economy is likely to shrink in the first quarter of 2021, but that the successful vaccine rollout and a surge in household savings during lockdowns could power a sharp recovery thereafter. Andy Haldane, the Bank’s Chief Economist, noted that £250bn of consumer spending could be unleashed, and that GDP growth could rise into the double digits.
In markets, Asian equities proved strongest again, driven by Japan whose index rose by just over 2% in Pound terms. Latest data show that the Japanese economy grew by 12.7% annualised last quarter, cementing a relatively positive 4.8% loss for 2020 as a whole, beating expectations. Sentiment was further boosted by news that the country will start its vaccination programme this week after finally approving the Pfizer jab. The Nikkei 225 index now stands above the 30,000 mark for the first time in more than 30 years, and while Japanese stocks are not as cheap as they once were, they still trade at a significant discount to their US counterparts.
Other developed market indices were further back, with European and US equities rising by 1.0% and 0.4% respectively, in the UK the FTSE 100 rose by 1.6% but the FTSE 250 fell by 0.1%.
Fixed income markets generated positive returns for the week, with UK government bonds recovering some of the losses seen in recent weeks. Corporate bond returns were more muted. Finally, precious metals prices oscillated about the zero bound, still struggling to find direction as bond yields and currencies remain volatile.
Oliver Stone – Head of Portfolio Management.
15th February 2021
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