“Several emerging market countries have recently accelerated their pace of vaccination and are now on track to reach critical vaccination levels in late 2021. After lagging much of the global recovery, these countries are poised for a reawakening in activity, providing an opportunity for investors to add to the reopening theme”.
Throughout the pandemic, vaccination has been key to both lifting social restrictions and local market performance. In the United States, where the S&P 500 is up more than 20% year-to-date, an early and aggressive vaccination rollout has allowed for the full reopening of its economy. While the U.S. recovery is likely to continue, investors should expect that additional boosts from vaccination momentum will be harder to achieve. Strong earnings are now key to the sustainability of the bull market.
In contrast, emerging market (EM) equities have suffered since early 2021, as lagging vaccinations, ongoing COVID-19 outbreaks, and start/stop restrictions dampened economic activity. However, for some EM countries, fortunes might be changing.
Brazil and Malaysia, for example, have materially picked up their rate of vaccinations. These countries, along with Chile and China, could reach critical vaccination levels – levels that should give their governments and the public confidence to resume more normal activity – within a few quarters. Other EM countries, such as India, while still plagued with slower vaccination rates, are making steady progress and should also experience a reawakening in confidence.