Vaccine delays and interest rate rise risks fail to dampen market exuberance – for now
- Markets have been fairly relaxed about vaccination roll-out delays but could still be spooked if a new virus strain proves resistant
- A sharp rise in interest rates, particularly as a result of inflation, could also prompt a damaging sell-off
Financial markets have been tearing ahead, fuelling abundant investment optimism even in the face of the ongoing Covid-19 crisis and health care systems creaking under the stress across much of the world.
The hope is that households have saved much of the large sums of money distributed by governments to support incomes during the crisis, and that the economic rebound may be very sharp when it comes. Consumer spending is likely to then surge on the back of pent-up demand, boosting economic growth everywhere, including in Asia’s export-oriented economies.
There is a lot of concerning news about slower-than-hoped-for vaccinations due to logistical challenges and manufacturing delays. Perhaps this was to be expected as financial markets have been surprisingly relaxed around the delay to economic reopening threatened by these difficulties.
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It seems that, as long as the eventual return to normality is not in question, markets are willing to look past the difficulties. A real scare would be if vaccines don’t seem to work on any new virus strains.
