“Vaccines Hit the Road"

MONETARY

• Federal Reserve’s most recent Beige Book release noted that overall economic activity grew at a mostly moderate to low pace, with some reporting districts describing little to no growth due to the recent uptick in infections¹
  • Most reporting districts also noted modest increases in employment, but firms continued to note trouble attracting and retaining workers due to childcare and infection concerns¹
  • Wage increases and schedule flexibility were widely noted by firms as a means to retain and attract individuals back into the labor force, especially among lower-skilled occupations¹
  • Report also noted that supply-chain disruptions due to short-staffed firms have caused transportation costs to rise, which are then being passed onto buyers¹
• In its most recent FOMC meeting, the Federal Reserve leaves rates unchanged as expected³
  • FOMC statement reaffirms its commitment to targeting an average inflation rate of 2% to help anchor inflation expectations around a healthy level³
  • Committee also notes that it will continue to increase its Treasury holdings at a rate of at least $80B per month, and increase its agency MBS holdings by at least $40B per month³
• Federal Reserve releases its second round of Dodd-Frank Act Stress Test (DFAST) results and shows that banks would remain strongly capitalized in the event of another severe economic downturn⁴
  • Stress tests included two hypothetical scenarios⁴
    • Unemployment spiking to 12.5% then declining to 7.5%⁴
    • Unemployment spiking to 11% then declining to 9%⁴
  • Note that these are not the Federal Reserve’s actual expectations, but rather hypothetical “what if” scenarios

 

FISCAL

• Congress passes its fifth Coronavirus relief bill into law⁵. Total amount of relief is around $900B. Some highlights of the relief bill include:
  • Direct stimulus checks of $600 per adult and $600 per child, subject to a phase-out schedule based on adjusted gross income⁵
    • For individual taxpayers, the phase-out will begin at an AGI of $75,000 and be reduced by $5 for every $100 of AGI earned over $75,000⁶. Taxpayers with an AGI over $87,000 receive nothing⁶
    • For taxpayers filing jointly, the phase-out will begin at an AGI of $150,000 and be reduced by $5 for every $100 of AGI earned over $150,000⁶. Joint taxpayers with an AGI over $150,000 receive nothing⁶
  • Additional unemployment benefits of $300 per week for 11 weeks⁵
  • Provides $325B in relief for small businesses, including a second round of the Paycheck Protection Program worth up to $280B⁵
  • $50B for the funding of vaccine distribution efforts⁵
  • Includes provision requiring Congress to explicitly re-approve the Fed’s emergency lending facilities in 2021 if the Fed would try to replicate the existing facilities⁵
• Senate majority leader Mitch McConnell blocks a vote on separately sending out additional stimulus checks and substitutes in a new proposal that includes additional stimulus checks, as well as other non-bipartisan demdands⁹
  • New proposal is largely seen as a non-starter for Democrats who would most likely object to non-bipartisan demands such as establishing a committee to investigate voter fraud and removing Section 230 liability protections for social media companies⁹

 

GEOPOLITICS

• President Trump signs into law the Holding Foreign Companies Accountable Act, which will require foreign companies to disclose relationships that they may have with foreign governments, as well as make foreign companies provide U.S. regulators access to company auditing records²
  • Currently, the PCAOB estimates that many Chinese companies do not comply with U.S. regulatory standards²
  • The penalty for not providing U.S. regulators with audit records would be a delisting of the company’s stock in the U.S.²
• United Kingdom and European Union come to terms on a post-Brexit trade agreement that eliminates the possibility of a “No-Deal” Brexit⁷
  • Major highlights of the agreement include UK & EU fishing rights, allowable state-aid regimes, dispute resolution regarding breaches of the deal, and inter-country travel⁷
  • Deal removes a significant degree of economic and policy uncertainty for both the United Kingdom as well as European Union constituents⁷

 

VACCINE

• The United Kingdom authorizes AstraZeneca/Oxford’s COVID-19 vaccine for emergency use authorization, making the vaccine the 3^rd to receive emergency use authorization in at least 1 country⁸
  • Vaccine is a two-dose regime, similar to Pfizer and Moderna’s vaccine⁸
  • FDA still needs to approve of the vaccine separately in order for the vaccine to be distributed in the U.S.⁸
• The CDC estimates that as of December 30, 2020, the U.S. has distributed 12,409,050 doses of COVID-19 vaccines and that the total number of people receiving a vaccine is estimated at 2,794,588¹⁰
  • For reference purposes, the first dose of Pfizer/BioNTech’s vaccine was given on December 14¹¹

 

[See Below for Disclosures & Annotations]

DISCLOSURES

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

The companies presented here are for illustrative purposes only and are not to be viewed as an investment recommendation.

 

ANNOTATIONS

1. Federal Reserve. “The Beige Book: Summary of Commentary on Current Economic Conditions”. December 2, 2020
2. The National Law Review. “Holding Foreign Companies Accountable Act Signed into Law”. December 30, 2020
3. The Federal Reserve. “Federal Reserve issues FOMC statement”. December 16, 2020
4. The Federal Reserve. “Federal Reserve Board releases second round of bank stress test results”. December 18, 2020
5. The Wall Street Journal. “Congress Passes Covid-19 Relief, Spending Package With Overwhelming Support”. December 22, 2020
6. SmartAsset. “Second Stimulus Checks: What You’ll Get, and When”. December 21, 2020
7. BBC News. “Brexit deal: What is in it?”. December 27, 2020
8. The Wall Street Journal. “Covid-19 Vaccine Made by AstraZeneca, Oxford Is Authorized by U.K.”. December 30, 2020
9. The Wall Street Journal. “Push for Bigger Stimulus Checks Is Running Out of Time”. December 30, 2020
10. CDC. “CDC COVID Data Tracker”. December 30, 2020
11. The Washington Post. “‘The weapon that will end the war’: First coronavirus vaccine shots given outside trials in U.S.”. December 14, 2020