After opining last week that the U.S. is likely halfway to Covid-19 herd immunity, Columbia Threadneedle analysts now see even more reason for optimism.
That’s what equity research analysts Kosta Kleyman, who focuses on biotechnology, and Chris Vandergrift, who focuses on payments and ecommerce, told Financial Advisor as a new vaccine from Johnson and Johnson was given emergency approval by the FDA, President Joe Biden accelerated the rollout of vaccinations, and Texas and Mississippi relaxed their coronavirus restrictions.
“We’ve only just started vaccinating a very narrow population, we’ve been having to cherry-pick rather than really open up the floodgates to vaccines,” said Kleyman. “We’re on the cusp of opening up the floodgates to anyone and everyone who wants it.”
For Kleyman, who wrote the opinion piece arguing that the U.S. is halfway to herd immunity, the speed of vaccine uptake is the main reason for optimism. He explained that his outlook was based on estimates that over 30% of people in the U.S. has already contracted the virus and recovered from it, and about 15% of the population has received at least one dose of an existing vaccine. “Once the floodgates open, we’ll go from 15% very quickly up to 60% or so by the end of the second quarter—that’s June.”
Columbia Threadneedle is placing the herd immunity threshold at 70% of the population, which is somewhat lower than projections by public health officials like White House advisor Dr. Anthony Fauci, who has pegged herd immunity at 85% of the population, and others who have said that as much as 90% of the population might need to be immune to finally stop Covid-19’s spread.
But Kleyman points out that the acceleration of vaccinations from this point onward will be dramatic. “The JNJ vaccine, just approved, is a much easier vaccine to distribute and administer,” he said. “It’s just one dosage, and in terms of storage, it just needs to be refrigerated. Add to that that Merck is supplementing the vaccine, and we’re going to be moving a lot quicker than we have over the past two-and-a-half months.”
After Johnson & Johnson, there may be two more vaccines with emergency approval in the U.S. by the end of May, from AstraZenaca and Novavax.
Economically speaking, that means it may not be too soon to gradually roll back some virus related restrictions, the analysts said.
“The initial view is that people are starting to feel comfortable that a lot of the population is getting vaccinated and case counts are going down precipitously,” said Kleyman. “We’re already at pre-winter surge levels, and the case numbers might be falling further. Those factors make herd immunity in the second quarter very plausible.”
One remaining risk that could prolong the path to herd immunity is the presence of variants from the U.K., South Africa and Brazil, against which the current vaccines have lower levels of effectiveness. The longer the virus circulates, the greater the chance for the emergence of more dangerous and more vaccine-resistant variants.
Also of concern to Kleyman is that people who recover from other strains of Covid-19 may still be susceptible to South Africa’s variant. “These variants do have some impact on the efficacy of the vaccines, and the South Africa variant is of course worrying,” he said. “The question is how quickly can we reduce the spread of the virus to the point where it’s minimal—at this point, those who have already been ill, or who received the vaccine and feel protected are potentially still at risk.”
A third issue that could stymie the return to normalcy in the U.S. is the spread of the virus and the pace of vaccinations in the rest of the world.