Coronavirus Diligence Briefing

• In the United States, a research report out of North Carolina has revealed even with the majority of the population vaccinated, the removal of pandemic precautions could lead to an increase in virus spread. The report published in the medical journal, JAMA Network Open came from Mehul Patel, an assistant professor of emergency medicine at the University of North Carolina and colleagues using a mathematical model to simulate coronavirus spread among approximately 10 million people in the state. Their study suggests for a population of 10.5 million people, approximately 1.8 million infections, 8,000 deaths could be prevented during an 11-month span with more efficacious COVID-19 vaccines, higher vaccinations and maintaining social distancing and use of face masks. Last month the Centers for Disease Control and Prevention (CDC) said it was safe for vaccinated people to go maskless indoors and outdoors, which was met with some skepticism from public health experts who believe it was too soon to relax pandemic precautions.

• Bloomberg is reporting Canada’s emergency COVID-19 assistance programs ended up helping the country’s highest-earning families, thus potentially opening up the federal government to criticism that its programs were wasteful. According to data from Statistics Canada, the top 20% of income earning families received an average of $6,728 CDN, while the lowest earning households got $4,097 CDN in aid, on average. The Canadian government’s pandemic support was considered one of the world’s most generous but was financed with billions of dollars in new debt and appeared given indiscriminately to dozens of different groups, and the majority ended up being put into bank accounts. Finance Minister Chrystia Freeland’s office declined to comment on the data but has said in the past in the beginning stages of the pandemic, the speed of the support was of utmost importance. 

• One day after a scientific adviser called for plans to lift all coronavirus restrictions by June 21^st to be reconsidered, United Kingdom Prime Minister Boris Johnson stated he sees nothing in the data to suggest a change of course. Via a spokesman for 10 Downing Street: “The Prime Minister has said on a number of occasions that we haven’t seen anything in data but we will continue to look at the data, we will continue to look at the latest scientific evidence as we move through June towards June 21.” Elsewhere in the country, the UK recorded zero coronavirus deaths on Tuesday for the first time since March 2020. 

• In Germany, there are signs the country is turning a corner in their latest fight against the coronavirus pandemic. Chancellor Angela Merkel said on Monday she plans to allow the controversial lockdown law that granted more powers to the federal government, while effectively suspending states’ rights to expire at the end of the month. “We don’t need to maintain them now, said Chancellor Merkel, but noted the tool exists if needed. “We know if something should develop again, with mutations – which we hope won’t happen – then we can reactivate it very quickly.” On Monday, Germany recorded 35.1 cases per 100,000 people over the last seven days – their lowest level since mid-October and as of the weekend – 43% of the population had received at least one inoculation against COVID-19.

• An Australian court on Tuesday rejected a challenge to the federal government’s decision to prevent most citizens from leaving the country, so they don’t bring the coronavirus and a potential variant back home with them. A Libertarian group called LibertyWorks argued before the Federal Court in early May that Health Minister Greg Hunt didn’t have the power to legally enforce the travel ban. Australia is flying solo among developed countries in preventing its citizens and permanent residents from leaving the country except in “exceptional circumstances” where they can demonstrate a “compelling reason”.

• The World Health Organization (WHO), along with the World Bank and World Trade Organization endorsed the International Monetary Fund’s (IMF) call to invest $50 billion to fight COVID-19 by making and delivering vaccines and treatments. The IMF last month proposed a plan that targeted to have 40% of the global population immunized – up from the 30% goal set by the WHO and to have 60% inoculated by the first half of 2022. The three organizations also called on the immediate donation of vaccines doses to developing countries. The IMF says the plan will save lives and deliver a potential $9 trillion economic boost by 2025.

Covid-19 – Due Diligence And Asset Management

The Covid Trauma Has Changed Economics – Maybe Forever

Brief : Once ideas about how to manage the economy become entrenched, it can take generations to dislodge them. Something big usually has to happen to jolt policy onto a different track. Something like Covid-19. In 2020, when the pandemic hit and economies around the world went into lockdown, policymakers effectively short-circuited the business cycle without thinking twice. In the U.S. in particular, a blitz of public spending pulled the economy out of the deepest slump on record—faster than almost anyone expected—and put it on the verge of a boom. The result could be a tectonic transformation of economic theory and practice. The Great Recession that followed the crash of 2008 had already triggered a rethink. But the overall approach—the framework in place since President Ronald Reagan and Federal Reserve Chair Paul Volcker steered U.S. economic policy in the 1980s—emerged relatively intact. Roughly speaking, that approach placed a priority on curbing inflation and managing the pace of economic growth by adjusting the cost of private borrowing rather than by spending public money. The pandemic cast those conventions aside around the world. In the new economics, fiscal policy took over from monetary policy. Governments channeled cash directly to households and businesses and ran up record budget deficits.

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Investment Professionals Think Equity Recovery was “Too Quick”

Brief: Investment professionals think equities have recovered too quickly – possibly due to a disconnect between capital markets and economics. Monetary stimulus measures could be the cause of the disconnect, a senior CFA Institute figure said. The findings were from a CFA Institute survey of members. However, members believed that a correction could be up to three years away. The survey found that 45% of over 6,000 global respondents expressed the view that equities in their respective markets had recovered too quickly and that they expected a correction within the next one to three years. CFA Institute will present its finding in an upcoming report called ‘Covid-19, One Year Later – Capital Markets Entering Uncharted Waters’. Paul Andrews, managing director of research, advocacy and standards at CFA Institute, said: “It is interesting to see the survey results telling us that respondents believe that equities have recovered too quickly, as it could show that CFA Institute members believe there is a disconnect between economic growth fundamentals and capital markets caused in part by monetary stimulus, which could be corrected in a not-too-distant future of less than three years.

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SFC Identifies Vaccination as Key Element of Operational Risk Management

Brief: The Securities and Futures Commission (SFC) issued a circular today urging licensed corporations to review their business continuity plan and consider Covid-19 vaccination as a critical part of operational risk management. In this connection, they should identify functions that are critical to their business operations and client interests and to encourage staff performing such critical functions to get vaccinated. “A higher vaccination rate in the community will accelerate a return to normality and strengthen the resiliency of the financial services industry.  Licensed corporations should strongly encourage their staff, especially critical support staff and those who are client-facing to get vaccinated as soon as possible,” the SFC’s Chief Executive Officer, Mr. Ashley Alder said. The SFC also advised licensed corporations to consider suitable arrangements for critical staff who have not yet been vaccinated or are unfit for vaccination due to medical conditions to undergo periodic Covid-19 testing.

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