Overall - current thinking

The improvement in Europe has stalled and many countries see higher cases again. Among others this is evident in Germany, France, Italy, the Netherlands and Austria. In Eastern Europe the rebound is quite sharp. The pace of vaccination is gradually increasing in the EU but is still much below the level of the US and the UK. In the US, the positive rate has stopped falling. Some states gradually ease restrictions.

We believe we could be in for another wave in Europe and the US during March due to the more contagious British variant taking over followed by improvement again in April when spring arrives. Mortality rates should also come down in Q2 as more of the vulnerable groups are vaccinated by then. Our best guess is that April will mark the real turning point in the COVID crisis when it comes to infections and deaths.

The vaccination process continues with Israel leading with a vaccination percent of nearly 89%. The US is slightly above 19%. The UK is ahead in the European race (above 27%) amid slow vaccine rollout and lack of supply in the European Union (6.3%). Our base case (which is also the consensus story) remains that restrictions are eased gradually in spring and that restrictions will not be re-imposed in the autumn. Analysis so far have found that vaccines are effective also against new variants, especially with respect to severe cases, which in our view is the most important feature of vaccines. Still, most vaccine producers have started to update vaccines targeting new variants just in case. Moderna is the first producer to test its updated vaccine against the South African strain in clinical trials. FDA has made it clear that producers only need to show that the vaccine works and not go through all 3 phases as with the original vaccine (which makes sense since the updated vaccines are basically the same). Still one of the major tail risks is if vaccines turn out to be ineffective against new mutations (or mutations yet to come). This would mean another 'lost' year, as the strong economic comeback would be postponed into 2022 and may imply a significant setback in risk sentiment with investors pricing in a very positive outlookAlso we cannot rule out this becomes an "endemic", i.e. we need to revaccinate in particular risk groups and health care workers every year to provide protection. That scenario, however, is not as bad as ineffective vaccines and should be manageable.

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