No parent can ever forget the day their child was born. From that moment on, you’re completely responsible for another, entirely helpless, human being. And so you do everything you can to love them, to nurture them, to teach them and to help them grow. At the start, their problems are little ones and usually you can help them surmount them.
But as they get older, you have to step back a bit. It’s hard, particularly when they are struggling with tough problems. But you can’t make friends for them or take exams for them or guide them in every choice they have to make. You can’t smooth every obstacle in their path and, if you tried to do so, you would prevent them from learning how to handle problems for themselves.
As we look back at this traumatic year, we have all seen many small acts of bravery and kindness and brilliance. However, as a nation, America has really struggled through this pandemic. Our innate distrust of authority has led many to ignore public health advice, contributing to greater economic disruption and a death toll now rising above 300,000. A similar distrust may well limit the numbers willing to take the vaccines that the biotech industry has produced in record time. In Washington, after the early passage of a huge relief package in March, both parties have slithered back into their partisan trenches, seemingly more willing to inflict pain on the economic victims of the pandemic than to cede an inch of ground in a bitter and unending political war.
In this environment, it is natural for the Federal Reserve to want to do more to fix our problems. They will meet on Tuesday and Wednesday of this week to discuss how they might do this. However, just as there are limits to what parents can do to truly help their children, there are limits to what the Fed can do to truly fix our ailments. Investors would do well to both recognize these limitations and to appreciate the unintended consequences of the Fed trying too hard to fix problems it just can’t fix.
Clearly, the Federal Reserve cannot fix the pandemic, which continues to worsen, with daily confirmed cases and deaths averaging over 200,000 and almost 2,400, respectively, over the past week. The test positivity rate is still running above 10% and hospitalizations are continuing to rise, pointing to a very high death toll in the weeks ahead.
On vaccines, the news is much better, with this week’s rollout of the Pfizer/BioNTech vaccine. While supplies of this vaccine may be limited to just 100 million doses in the U.S. before June, the federal government has now exercised an option to increase purchases of the Moderna vaccine, if it is approved, to 200 million doses by the second quarter. Both of these mRNA vaccines require a double dose, so this would still only be enough to vaccinate 150 million Americans. However, if the Johnson & Johnson, AstraZeneca and possibly other vaccines are approved in the next few months, it should be possible to inoculate all Americans who want the vaccine by the end of the second quarter, as was asserted last week by Dr. Slaoui, the chief scientific officer of Operation Warp Speed.
Of course, logistical problems in implementing mass vaccination at the state level could cause delays. In addition, there may be a challenge in convincing enough Americans to take the vaccine. Recent polling by Gallup suggests that only 63% of Americans would be willing to get vaccinated right away. However, this number should increase if vaccination is perceived to be going smoothly and if public officials physically roll up their sleeves themselves and take the vaccine in an effort to boost public confidence. Finally, given that 300,000 Americans have already died of Covid-19, if we assume a true mortality rate of 0.5%, then roughly 60,000,000 Americans or nearly 20% of the population may already have some immunity to it. This could, sadly, easily build to 30% or more before vaccination provides a much safer path to herd immunity in the year ahead.
Putting this all together, it seems reasonable to expect that vaccination and building natural immunity could effectively end the pandemic over the summer of 2021 and that, by the fall of next year, the economy and our lives should be able to return to normal.
If vaccine development has raced forward at warp speed, then to extend the Star Trek analogy, fiscal negotiations have stumbled along on impulse power. And, unfortunately, the first impulse of the negotiators appears to be to grasp for political advantage rather than address the problems at hand.
That being said, the next few days could finally see a coronavirus support package passed. On Friday, the president signed a one-week stopgap measure to prevent a government shutdown. However, even with this, by this Friday, an omnibus spending bill will need to be signed into law to keep the government running and both Democrats and Republicans are aiming to attach coronavirus relief to this bill.