Well, That’s Some Weird… Stuff 

Doug Nolan


The “average stock” Value Line Arithmetic Index jumped 6.4% for the week. The NYSE Arca Oil Index surged 19.8%, with the Philadelphia Oil Services Index up 17.4%. The KWB Bank Index rose 11.5%, as the Nasdaq Bank Index advanced 13.6%. 

The Bloomberg REIT Index jumped 6.8%. 

The S&P600 Small Cap Index gained 7.5% for the week, as the S&P400 Midcaps rose 4.3%. The Bloomberg Americas Airlines Index jumped 12.9%. The JPMorgan Leisure Travel Index surged 15.3%. Major equities indices rose 13.3% in Spain, 11.9% in Austria, 11.5% in Greece, 10.5% in Belgium, 8.5% in France, 6.9% in the UK and 4.8% in Germany. Turkish stocks surged 8.3%. Crude (WTI) prices jumped 8.1%. Meanwhile, Zoom was down 19%, Netflix 6.2%, Facebook 5.6%, Amazon 5.5%, and Tesla fell 5.0%. Well, That’s Some Weird… Stuff.

I have no interest in disparaging Pfizer’s (and BioNtech’s) Monday announcement of 90% effectiveness for their Covid vaccine. It’s encouraging news. 

But it is a two-shot vaccine with what reportedly can induce strong post-shot reactions. 

Moreover, logistical challenges await a vaccine requiring extreme cold storage (negative 100 Fahrenheit). There will be limits to its availability, but mainly I expect a majority of American’s initially to approach Covid vaccines with caution. While many questions remain unanswered, the bottom line is 90% effectiveness bodes well for Covid vaccines generally. 

Monday’s market reaction to the news doesn’t bode so well for general market stability. 

November 13 – Bloomberg (Justina Lee): “Jon Quigley says he probably should have known something big was coming -- even if his risk models didn’t. Just a day after the Great Lakes Advisors manager watched CBS’s ‘60 Minutes’ about America’s unprecedented efforts to deploy a vaccine when it comes, Pfizer Inc. revealed significant progress on its pandemic cure. That revelation spurred the biggest moves ever in Quigley’s $3.9 billion portfolio. While stock benchmarks cheered the news, Wall Street’s most popular styles of quant trading got hit by a historic storm. ‘Events happened that statistically never could happen,’ said the chief investment officer of disciplined equities… Quigley spelled out the odds to clients in a note. As he computed it, the crash in the momentum factor was so rare that writing out the chances of occurrence on any given day required a 16-digit number -- followed by 63 zeroes.”

Monday’s Pfizer announcement followed pivotal elections by only a few trading sessions – an election I have posited as the most hedged individual event ever. Markets were already in a state of acute instability prior to the news, having been spurred sharply higher by the unwind of hedges and short positions. 

Those positioned bearishly had suffered only deeper impairment, while derivatives markets were moving toward dislocation. Holders of puts were in liquidation mode, while those that had written out-of-the-money call options (and similar derivatives) were facing rapidly escalating exposure. 

In the leveraged speculating community, the more sophisticated strategies were performing poorly. In particular, long/short strategy performance was suffering the effects of a brutal short squeeze along with violent rotations. A marketplace consumed with momentum was all Crowded together in the favored technology and “stay-at-home” stocks. 

The Pfizer news showered gasoline upon the bonfire. It was a melt-up dislocation and short squeeze as intense as I’ve witnessed over recent decades. Segments of the market traded as if some hedge fund and sophisticated derivatives strategies were “blowing up”. As for long/short strategies, things went from bad to cataclysmic. 

From Bloomberg: “…Market winners and laggards switched positions at the fastest rate on record Monday.” Attacked savagely, the persecuted bears were hit with a fateful blow. A “bear” ETF lost 11% of its value in a chaotic Monday trading session. 

Sure enough, such a market outcome “statistically never could happen.” In reality, such a freakish backdrop created a high likelihood of just this kind of mayhem and market dislocation (either up or down). 

Especially in the current backdrop, market melt-ups come replete with risk. For one, most have turned crazy bullish. Ignoring risk continues to be rewarded. Equities funds attracted a record $44.5 billion over the past week (ending Wednesday). State Street’s SPDR S&P 500 ETF (SPY) received Monday inflows of $9.8 billion. Meanwhile, Wall Street strategists are climbing over each other to raise market targets.

I often highlight the late-cycle phenomenon characterized by extreme divergence between inflating securities prices and deflating economic prospects. I have surmised this gulf is the greatest since 1929. And this chasm has only widened since the election, especially during Monday’s session.

The pandemic has profoundly impacted market dynamics. An already acutely speculative marketplace has been only further emboldened. Not only has the “Fed has the market's back” view been solidified. After a $3 TN ballooning of the Fed’s balance sheet, there is no doubting the Fed’s capacity to deliver an effective market backstop.

A contested election and upheaval in Washington - no problem. Covid infections spiraling out of control throughout the entire country – not a market concern. The prospect of a dark, Covid winter with social strife and economic vulnerability today seems the furthest thing from Mr. Market’s triumphant mind.

As readily espoused by the bullish punditry, markets are a discounting mechanism - and are these days doing what they’re supposed to do: price securities for the eventuality of a favorable post-vaccine economic landscape. Look past the valley. Robust recovery is only an issue of when.

And that’s what makes this pandemic market environment unique. This is a horrendous pandemic inflicting terrible damage to health, the economy and social stability. But it will pass – and in the meantime the Fed is happy to print Trillions. 

Fiscal authorities have gladly disbursed Trillions more. No matter how bad things get, speculative markets can imagine nothing but (oodles of “money” and) blue skies ahead.

Importantly, so long as market imagination fancies a sensational future, booming markets will support confidence, spending and investment. The resulting loose financial conditions ensure that even weak borrowers (individuals, corporations, municipalities and others) enjoy access to cheap finance. 

This bolsters business spending, while obscuring the scope of a festering Credit debacle. Moreover, wealth effects continue to underpin economic recovery. And let’s not overlook the rapidly inflating Bubble in housing markets across the country.

Things, however, will just not play out to match bullish hopes and dreams. The pandemic will pass. But it will leave deep and lasting scars. This Bubble has been inflating for a very long time. Structural impairment has worsened over time, with the greatest damage now inflicted during pandemic “Terminal Phase Excess.” 

At this point, markets are scary dysfunctional. Melt-ups lay the groundwork for breakdowns. And the longer markets disregard reality, the more destabilizing the eventual reckoning. There’s a major economic crisis shoe to drop when market Bubbles succumb. 

Friday’s reporting had a daily record 182,000 of new infections (worldometer), with the seven-day average now surpassing 132,000. Hospitalizations nationally posted new records on four straight days (having doubled in a month to almost 69,000). 

Daily cases are spiking higher in a growing number of states, with particularly troubling increases in Wisconsin, Illinois, Minnesota, Michigan, Ohio, Pennsylvania, Indiana, Iowa, Kansas, Nebraska, North Dakota, South Dakota, New Mexico, Colorado, Wyoming, Utah, and Massachusetts. A message from Ohio Governor Mike DeWine: “We are facing a monumental crisis in Ohio.” 

New restrictions were imposed in New Jersey, Oregon, New Mexico, Idaho, Virginia, and elsewhere. The West Coast states issued a joint travel advisory, while California is warning of tougher measures to come. Northeast governors are planning a weekend “emergency summit meeting.” New York City will likely close schools Monday. 

The Covid crisis is again reaching fever pitch, which was previously associated with stronger compliance and peak daily infections. But this time is different. Virtually the entire nation is experiencing rapidly rising case numbers, and we’re heading right into the winter season. 

Hospitals are filling. On a national basis, resources will be in short supply and difficult to shift to hot zones. It’s all ominous.

Speaking of ominous, interesting developments this week out of China, along with the release of October Credit data. 

China experienced a broad-based Credit slowdown in October. Aggregate Financing expanded a weaker-than-expected $215 billion, down from September’s $526 billion and the slowest growth since February. It’s worth noting last October was the weakest monthly Credit expansion ($131bn) of 2019. 

For the first 10 months of 2020, Aggregate Financing surged $4.696 TN, 45% above comparable 2019 and 64% ahead of comparable 2018. Aggregate Financing was up $5.315 TN over the past year – an historic Credit binge. The 13.7% year-over-year growth rate was the strongest in years. 

New Bank Loans slowed to a below-expectations $103 billion, down from September’s $281bn, and the slowest growth in a year. The year-to-date expansion increased to $2.511 TN, 19% ahead of comparable 2019. One-year growth slowed slightly to 12.9%. 

Two-year growth was at 26.9%, with five-year growth of 83.6%.

Consumer loan growth slowed to $66 billion, down from September’s $147 billion and the weakest reading since February’s contraction. Year-to-date growth of $992 billion was 7.4% ahead of comparable 2019. Consumer Loans expanded 14.6% y-o-y, with two-year growth of 32%, three-year 56%, and a five-year expansion of 135%. 

Corporate Loans dropped to $35 billion, down from September’s $143 billion to the weakest growth in a year. Year-to-date growth of $1.633 TN was 29% ahead of comparable 2019 and 49% above comparable 2018. 

M2 money supply contracted $218 billion during October, the largest monthly contraction since July 2014. 

This reduced year-to-date M2 growth to $2.469 TN, or 11.7% annualized. M2 expanded $1.798 TN over comparable 2019. M2 expanded $3.088 TN, or 10.5%, year-over-year. 

With October a seasonally slow month for lending and Credit growth more generally, we shouldn’t at this point read too much into weak data. Yet policymakers have clearly moved to pull back on stimulus measures. Consumer loans declined meaningfully during October, held in check at least partially by measures to tighten mortgage Credit. 

Faith that Beijing has everything under control runs as deep as ever. But China’s Credit growth has been averaging an incredible $470 billion monthly over the past 10 months. This Credit onslaught has kept a lot of weak companies solvent. It has also stoked a stock market mania and additional apartment Bubble excess. 

Policymakers are not oblivious to these risks and have moved to cautiously rein in lending and speculative excess. But history informs us that attempts to let some air out of Bubbles are fraught with risk. 

For a historic and prolonged Chinese Bubble, fragilities and vulnerabilities are acute.

November 13 – Bloomberg: “China’s ex-finance minister said it’s time to consider withdrawing the monetary stimulus injected into the economy this year and fine-tune fiscal policies as the recovery strengthens… ‘It is time for China to study an orderly exit of loose monetary policies,’ Caixin quoted Lou Jiwei, who was finance minister from 2013 to 2016, as saying… That doesn’t mean it would be an immediate exit, he added. The challenge is to carefully manage the pace of the exit, Lou said, given high debt levels in the economy. If liquidity is withdrawn too soon it could trigger debt crises, he said.”

November 13 – Bloomberg: “The surprise default of a state-run Chinese coal miner and a slump in bonds of a prominent chipmaker took center-stage this week, deepening concerns over the health of state-owned enterprises. Dollar bonds of several Chinese state-owned firms tumbled Wednesday after Yongcheng Coal & Electricity Holding Group’s onshore default and rising stress at a prominent chipmaker triggered broader concern about the sector. Tsinghua Unigroup’s dollar bonds extended their recent plunge on Thursday amid growing concern over the company’s future and its ability to repay its debts.”

November 10 – Bloomberg (Zheping Huang and Coco Liu): “Xi Jinping’s Communist Party stepped up efforts to rein in some of China’s most powerful companies, jolting investors and dealing a blow to the country’s richest entrepreneurs. Beijing… unveiled regulations to root out monopolistic practices in the internet industry, seeking to curtail the growing influence of corporations like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. The rules, which sent both stocks tumbling over two frenetic days and sparked a wider selloff in Chinese equities, landed about a week after new restrictions on the finance sector triggered the shock suspension of Ant Group Co.’s $35 billion initial public offering.” 

From Bloomberg: “PBOC Deputy Governor Liu Guoqiang said last week that ‘[stimulus] exit is a matter of time and it is also necessary.” China’s 10-year sovereign yields jumped seven bps this week to a one-year high 3.26%. Three-month “repo” rates (3.30%) rose to the high since December. According to Bloomberg, “The interest rate on 1-year negotiable certificates of deposits issued by AAA-rated companies climbed to the most expensive since June 2019.” 

There were indications this week of the start of a consequential tightening of financial conditions. 

From Bloomberg: “China State Banks Said to Cut Corporate Bond Exposure Amid Rout - A number of Chinese banks are cutting their holdings of corporate bonds, with some focusing on notes sold by state-owned firms, after a string of defaults roiled the market…” 

Also Friday from Bloomberg: “Stress in China’s Credit Market Spills Over to Financial Stocks - The default of a Chinese coal miner has triggered mounting concern over the health of state-owned firms and their lenders. The SSE 50 Index of Shanghai’s largest stocks slumped as much as 2.3% on Friday, led by banks and insurers.”

Is it a coincidence that Credit issues are erupting in the wake of one month of slowing Credit expansion – with the first hint of a winding down of massive policy stimulus?

It’s certainly ominous. 

Beijing moved aggressively to contain Covid, and then historic Credit growth spurred economic recovery. 

But over $4.5 TN of new Credit in 10 months only exacerbates China’s financial and economic fragilities. 

With U.S. elections and Covid, China has been off the radar. 

Time to pay attention. 

The technology of hope

An effective covid-19 vaccine is a turning point in the pandemic

It is a breakthrough for the history books. But a lot still needs to be done


Deliverance, when it arrives, will come in a small glass vial. First there will be a cool sensation on the upper arm as an alcohol wipe is rubbed across the skin. Then there will be a sharp prick from a needle. 

Twenty-one days later, the same again. As the nurse drops the used syringe into the bin with a clatter, it will be hard not to wonder how something so small can solve a problem so large.

On November 9th Pfizer and BioNTech, two firms working as partners on a vaccine against covid-19, announced something extraordinary about the first 94 people on their trial to develop symptoms of the disease. At least 86 of them—more than nine out of ten—had been given the placebo, not the vaccine. A bare handful of those vaccinated fell ill. The vaccine appeared to be more than 90% effective.

Within a few weeks the firms could have the data needed to apply for emergency authorisation to put the vaccine to use. The British and American governments have said that vaccinations could start in December. The countries of the eu have also been told it will be distributed quickly.

The news lifted spirits around the world, not to mention stockmarkets (see article). The end of the pandemic seemed in sight; scientific insight and industrial know-how had, in a bravura display of their power, provided an exit strategy. Pfizer and BioNTech have not just developed a vaccine against a previously unknown disease in a scant ten months. 

They have done so on the basis of an approach to vaccination never before used in people. And their novel vaccine has shown an unanticipated efficacy. Most in the field thought 70% efficacy was good as could be hoped for first time out; just 50% could have been good enough for regulatory approval. Exceeding 90% hits the virus for six.

Russia and China have been vaccinating some citizens against covid-19 for some time outside the scope of clinical trials. On November 11th the Russian Direct Investment Fund announced that data showed Russia’s vaccine, known as Sputnik V, to be 92% effective. Before the Pfizer announcement this would have seemed highly implausible. 

Now it may seem less so, though the evidence is weak compared with Pfizer’s. And neither Sputnik V nor the Chinese vaccines have yet had their safety and efficacy addressed by the stringent regulators at the Food and Drug Administration (fda) in America and the European Medicines Agency (ema).

Pfizer’s vaccine is now headed into that regulatory gamut with a small posse of followers hot on its heels (see table). Two other vaccines which are in phase-three trials—the sort of large, randomised trials designed to show the efficacy of a treatment—could submit data to the regulators fairly soon. 

Moderna, an American biotech firm, is expected to deliver interim findings about the efficacy of its vaccine in the next few weeks. AstraZeneca, a pharmaceuticals company working in partnership with the University of Oxford, should deliver results from its trial before the end of the year.



Challenges remain. Though the regulators will want to move quickly, they will still have to do their job. Missteps could erode confidence in the vaccine, as well as vaccination more generally. 

Plans for scaling up manufacture and for distribution on an unprecedented scale have been being made around the world for months, but it is hard to imagine that they will not require revision on the hoof. Even if the news continues to be good, the numbers vaccinated will remain small for months to come. 

But a fateful corner has been turned.

The technology of hope

Great speed has come from great efforts. Cath Green, the boss of the clinical biomanufacturing facility at the University of Oxford, remembers the pressure to get the first candidate-vaccine vials filled in April. Everyone was doing double shifts and working on weekends. “We knew it had to be this fast if we were to get a vaccine to people this year,” she says.

But it was not just hard work. New technology, a lack of financial constraint and a commitment to speeding up regulatory processes without sacrificing standards mattered, too.

Technology first. Vaccines against viruses used to be based on the virus particles they were meant to stymie. Some were strains of the virus “attenuated” so as not to cause disease; some were normal virus particles inactivated so that they could not reproduce at all. Design was somewhat hit and miss. Today vaccine development is based on viral genomes. Researchers look for a gene which describes a protein the immune system seems likely to recognise. Then they put that gene into a new context.

In the case of sars-cov-2, the virus that causes covid-19, the genome was published on January 10th. Understanding its structure on the basis of their experience with other coronaviruses, would-be vaccine-makers immediately homed in on the gene for the distinctive spike protein with which the virus’s membrane is studded: just the sort of thing, they reckoned, to provoke a response from the immune system.

At BioNTech, a German biotechnology company that specialises in the use of mrnas—sequences of genetic material that provide cells with recipes for making proteins—the spike-protein gene was more or less all it took. 

The company’s researchers made an mrna version of it that could be injected into the body in tiny capsules made of lipids. There it would lead cells to produce the spike protein, and the immune system would then take note. 

Or so they hoped: no mrna vaccine had been used in humans before. Moderna, too, has as its name suggests taken the mrna route.

In Oxford a version of the spike gene was instead put into the genome of a harmless adenovirus originally found in monkeys; when the resultant virus infects cells it, too, makes them produce spike proteins that attract the immune system’s attention. The vaccine developed by J&J also uses the adenovirus approach, as does Sputnik V.

It is no accident that the vaccines that have come along fastest are based on these novel strategies. Before the coronavirus struck these technologies were already being developed as platforms on which a rapid response to a new viral disease could be built, work supported in part by the Coalition for Epidemic Preparedness Innovations (cepi). 

Vaccines which are built on such platforms are quick to engineer and comparatively easy to make.

The correct egg-to-basket ratio

That said, the work still requires money, which in the vaccine world is usually in short supply. With covid-19, though, governments have been willing to shovel cash at vaccine developers even though there was a risk they would get nothing in return. “We persuaded the uk government to fund us before they had any idea whether it would work,” says Dr Green. 

It was this ready cash, sometimes provided in the form of a commitment to buy the end product, which sped the process up, rather than any loosening of normal rules and procedures. “We haven’t cut any corners,” Dr Green continues. “And we haven’t taken any risks with our product.”

Rather than standing back, regulators in many countries have worked closely with companies to make sure their trials provide all the data needed for approval when the time is right. When it was safe to do so, the different phases of trials were allowed to overlap, with larger, later trials starting before smaller preliminary ones had produced all their data. At Oxford they were able to start human trials the day after animal safety data had been published.

Richard Hatchett, the head of cepi, says Pfizer’s positive results increase the probability that other covid vaccines will be successful, too. They show that an mrna vaccine can work, which is good news for Moderna; they also show that targeting the spike protein pays off. And the success goes beyond the current pandemic. Work cepi expected to take five or ten years has been managed in less than one; if the various platforms in play all pay off, Dr Hatchett says, it will “transform vaccinology”.

The fact that there are more vaccines on the way matters for a number of reasons. One is that, despite this week’s good news, the Pfizer vaccine is not yet guaranteed approval. For one thing, its safety needs to be more fully ascertained. The firm says that no serious safety concerns have arisen during the trial. 

But the vaccine will come with side-effects, at least for some, and the company will only be in a position to request approval for the vaccine on an “emergency use” basis after it has two months of safety data showing such effects to be manageable. That requirement looks likely to be met in time for an application in the third week of November.

Then comes the question of what exactly the vaccine does: is it stopping infections completely—providing “sterilising immunity”—or simply amping up the body’s response so that infections do not cause disease? The latter attribute is undoubtedly a useful one for the individual concerned; all the better if, as well as lowering the chance of infection leading to disease, it also makes the disease less severe in those who succumb (there is as yet no available data on this). 

But it is a lot less desirable in public-health terms. If the vaccine stops disease but not infection, vaccinated people may be able to infect others while staying safe themselves.

If the Pfizer vaccine does not provide sterilising immunity there will be a need for one that does. And there are other ways that subsequent vaccines might prove preferable. 

Different vaccines can work better or worse with different populations, and for covid-19 it is important to find a vaccine which works well in old people. Their immune systems can often be unresponsive to vaccination, and they may do better with vaccines which, in the general population, do not look as effective. There is no guarantee that the best vaccine overall will be the best for the elderly.

And the Pfizer vaccine has some inconvenient characteristics. It needs to be kept at -70°C or even colder as it is moved from where it is made to where it is used, which requires a lot of equipment that other vaccines do not need. Seth Berkley, head of the vaccine finance group gavi, warns that many countries do not currently have the wherewithal to meet that challenge. But he also notes that the lack is not insuperable. The Democratic Republic of Congo successfully deployed an Ebola vaccine that required similarly special care. “It’s a pain in the ass, it’s expensive, but it’s doable.”

Still, a vaccine which, if not liking it hot, at least liked it less cold would be a boon. So would one that only needed to be given once. The Pfizer, AstraZeneca and Moderna vaccines all require two jabs weeks apart. A one-and-done vaccine, which is what J&J hopes for, makes setting up a vaccination programme far simpler. It also means a given number of doses will go a lot further.

On top of all this, the long-term efficacy of the vaccine will matter a lot. The Pfizer/BioNTech collaboration says that protection should last at least a year. 

But that will not be known for sure before they apply to regulators for full authorisation on the basis of final trial results, which they are expected to do in the first quarter of next year (as are the makers of the other front-runners). A vaccine that provides protection only briefly might well not be able to disrupt the virus’s transmission, instead feeding a constant stream of newly susceptible people back into the population at large. 

Marcus Schabacker, the boss of the Emergency Care Research Institute, an American organisation focused on the quality and safety of medical practices, thinks six months of follow-up data ought to be scrutinised, not just two, before final decisions are made on deploying the vaccine.


Such questions will be on the minds of regulators at the fda and ema when they are asked to consider the Pfizer vaccine for emergency use later this month and when Pfizer and the makers of other vaccines submit all the data from their trials next year. 

Their opinions will have worldwide effects, as the World Health Organisation (who) will use the analytical capabilities of those authorities to accelerate the review of vaccines for use in low- and middle-income countries.

If emergency authorisation is granted it is likely the agencies will restrict the use of these vaccines, initially, to those at highest risk of death or serious disease. If after seeing the full data the regulators still have worries they may continue to limit the vaccines’ use. Whatever they decide they are very likely to insist on years of follow up.

Andrew Pollard, director of the Oxford Vaccine Group, says it is important that all developers carry on with trials as long as possible. But this may be hard unless early use is restricted to specific groups. If a vaccine is approved for use in the general population, few will volunteer to take part in a trial for another vaccine that uses a placebo as a control (if Pfizer and BioNTech receive an emergency authorisation they plan to offer all the volunteers who were given a placebo the active vaccine). 

A trial that compares an experimental vaccine with one that is already approved needs to be very large to get results, since both wings can be expected to show comparatively few infections. Such trials are under discussion, but they will take a long time.

If vaccines are approved for widespread use, the world will face what some have called the largest supply-chain challenge in history. There is normally little spare vaccine-manufacturing capacity to repurpose. And production is not the only limiting factor. Analysts at ubs, a bank, warn that “fill and finish”, where the vaccine is put into vials and packaged, could be one of the most significant bottlenecks.

Pfizer says it will only be able to make enough vaccine to inoculate 25m people in 2020. Up to 1.3bn doses are possible, in theory, next year—enough for another 650m people. 

If other vaccines are approved then the supply will increase. In even the most optimistic scenarios, though, Dr Hatchett expects demand to exceed supply throughout 2021.

Various countries have already set up purchase agreements with vaccine developers (see chart). The covax facility set up by cepi, gavi and the who will buy vaccines for 150 countries, and aims to procure enough for them to get 20% of their populations vaccinated over the course of 2021. unicef, the un’s children’s agency, will take a leading role in distribution. It normally procures 600m-800m syringes for routine childhood immunisations every year. The demands of covid are likely to treble or quadruple that number.

There is clearly a risk that nations will hoard some vaccine for their own use rather than that of the most needy, but it is not easy to say how large the problem will be. 

Pharma firms have cleverly placed manufacturing sites around the world, including in small countries such as Belgium and Switzerland which can quickly produce more vaccine than these countries could ever want. And the covax framework has wide international support.

That framework follows advice from the who in identifying three priority groups for early vaccination: front-line health- and social-care workers; the over 65s; and those under 65 who have underlying health conditions, such as diabetes, which put them at particular risk. Countries setting their own priorities are by and large prioritising the same groups. 

This means that young and middle-aged people not in any risk categories are unlikely to be vaccinated until well into next year. Social distancing and mask wearing will stay important for some time to come even after vaccination becomes widespread. But a more normal form of life looks unlikely to be too long delayed.

For vaccination to work as well as it can requires a widespread willingness to be vaccinated—something that cannot be taken for granted in a world where anti-vaccine disinformation has a strong foothold. The data on this front, though, are broadly encouraging. A survey of 20,000 adults in 27 countries undertaken for the World Economic Forum this August found that 74% would get a vaccine if it were available. 

In China the figure was 97%, in India 87%, in America 67%. Countries with low rates of acceptance were Russia (54%), Poland and Hungary (both 56%) and France (59%).

A cold coming

Better testing, new antibody treatments and improvements in care will continue to drive down the death rate for coronavirus both before widespread vaccination and after it. 

Vaccination will instead change the fundamentals. Its advent marks the beginning of the end of covid-19 as a pandemic.

But for all the hope that diligence and science have kindled, there are hard winter months to face before that spring. The official tally of daily deaths round the world is now for the first time higher than it was in the pandemic’s first peak, and the spread of the virus in America appears to be out of control. In the next three months hundreds of thousands of people look likely to die. 

Not only will their loved ones have to come to terms with this loss, they will also have to live with the knowledge that a vaccine that could have saved them, even though developed at breakneck speed, arrived just too late. 

Baby boom, baby bust

The pandemic may be leading to fewer babies in rich countries

And perhaps more in poor ones


WHEN KAMPALA went into covid-19 lockdown, singletons in the Ugandan capital were looking for “lockdown partners”, says Allan Creed, who works in digital marketing. He and his friends couldn’t get to their local shops to buy contraceptives. 

Mr Creed has been relying on free condoms doled out by the United Nations Population Fund (UNFPA) via a local motorbike ride-hailing app called SafeBoda. But three of his friends now have unplanned pregnancies in the midst of their university degrees. “We were not moving, we were not working, nothing was happening, so you had a lot of time on your hands,” the 26-year-old explains.

Meanwhile in wealthy Singapore, where contraception is easy to come by, young people who were already reluctant to start a family before the pandemic are even more so during a global recession. The government is trying to coax people into reproducing with a one-off grant of S$3,000 ($2,200) for having a child in the next two years on top of pre-existing payments and savings schemes. 

For Keith, even that doesn’t make up for the cost of becoming a father. “I know that me and my wife will have a very good time in the next 30, 40 years without kids,” the 36-year-old says. “Do we want to risk that?”

It is too early, by a few months at least, to be sure what the effect of covid-19 will be on fertility rates. But different patterns seem to be emerging in rich and poor countries. Few women want to have a child in a time of uncertainty. In the rich world many are holding off starting a family or adding to it. 

But in the poorest places, where women often have less choice in the matter, a baby boom may be in the offing. Governments are already trying to adapt. 

It is not just Singapore trying to boost birth rates. Japan’s new prime minister, Suga Yoshihide, last week called for health insurance to cover in vitro fertility treatment. Japanese government figures showed an 11% fall in new pregnancies in the three months from May relative to last year.

In poor countries mass displacement is adding to sexual activity. In refugee camps, where people rely on informal work that dried up during lockdowns, transactional sex is expected to rise. When India announced an abrupt lockdown in March millions of urban workers lost their jobs and fled to their home villages across the country, and in Nepal, Bangladesh and beyond. 

They were reunited with lovers they usually see just a few times a year over public holidays. That could be enough to throw off population forecasts, says Vinit Sharma of the UNFPA. “We had not expected so many couples to be together for such a long period of time,” he adds.

More sex doesn’t necessarily mean more babies. But covid-19 has disrupted supply chains for contraception. Poor people rarely buy several months’ worth of contraceptives at once. Even a short break can lead to unwanted pregnancies. Data from health facilities in India show that between December and March the distribution of contraceptive pills and condoms dropped by 15% and 23%, respectively. Insertions of intrauterine devices for long-term birth control also tumbled.

The Guttmacher Institute, a pro-choice think-tank, points out that the strain placed on health-care systems in developing countries by covid-19 is likely to disrupt sexual-health services. It estimates that a fall of 10% in the use of such services in 132 low- and middle-income countries will mean that 50m more women will not get the contraceptives they need this year, leading to 15m unintended pregnancies. It estimates that 28,000 mothers and 170,000 newborns will die, and there will be an extra 3.3m unsafe abortions.

In the rich world, by contrast, women tend to have greater control over family planning. This means that anxiety caused by the pandemic looks likely to cause a sharp decline in birth rates. A survey by the Guttmacher Institute of American women aged 18 to 34 in families earning less than $75,000 found that a third want to get pregnant later or have fewer children because of covid-19 (see chart 1). A recent paper published by the IZA Institute of Labour Economics predicts a 15% drop in America’s monthly births between November and February, 50% larger than the decline following the 2007-09 financial crisis.



Covid-19 threatens to speed up a decades-old trend towards smaller families in rich countries. In Singapore the fertility rate (ie, the number of children that a woman can expect to have during her lifetime) was 1.14 (far below the replacement rate of 2.1), even before the pandemic. When New York City went into lockdown, many people stopped fertility treatment. 

Some hospitals did not allow partners into delivery rooms. The prospect of going through birth alone put some women off starting a family, according to Brian Levine, founder and director in New York of CCRM Fertility, a network of fertility clinics in America and Canada. 

“You’re not going to see a bunch of people being born in December and January because [people] were home and bored and having sex,” he says. “They were home and bored and scared.”

Women are worried about catching covid-19 while pregnant, since medics say it is possible to pass the virus on to an unborn child. Others have found themselves taking on a disproportionate share of housework during the lockdown and can’t face looking after a newborn, too. “It’s not people saying they don’t want kids—it’s them saying they can not and should not,” says Karen Benjamin Guzzo at Bowling Green State University in Ohio.

At Planned Parenthood, the country’s largest provider of abortions and reproductive services, the number of medical abortions has gone up. Gillian Dean, who works in obstetrics and gynaecology for the group in New York, says patients are terminating pregnancies they would have continued in other circumstances. “I’ve had patients who are frontline workers, who are the only people in their homes who are employed, and they feel like they need to do everything they can to not step away from the workforce right now,” Dr Dean says.

Evidence from an outbreak in 2015-16 of Zika, a disease that causes birth defects, suggests covid-19 won’t have a uniform impact across the developing world either. In Brazil, a middle-income country where half of all pregnancies are unintended in normal times, the number of births dropped after Zika hit. This is a sign that many women managed to obtain contraception (or illegal abortions). 

Births fell furthest in the north-east, where the Zika epidemic struck first and hardest, according to research led by Letícia Marteleto at the University of Texas at Austin. This year, with covid-19, it is black women and other minorities in Brazil who find it hardest to access health care, even after taking account of their poverty.

In May Malu Sícoli, a lawyer in São Paulo, Brazil’s largest city, decided to stop trying for a baby until the pandemic subsided. Days later she found out she was already pregnant. Memories of Zika added to her anxiety about having the child. “The first time I went for a prenatal screening I was sick with nerves,” she says. “I was nervous about being on the street, let alone in a medical clinic, a laboratory, a hospital.”

The big question is how long-lasting the impact on birth rates will be. History suggests the decline in birth rates could be rapidly reversed. Those who conceived unplanned babies during the pandemic might have fewer children later in life to even things out. 

Women in rich countries who put off pregnancy might start trying again once the jitters around covid-19 calm down. 

Fertility fell after the 2003 Severe Acute Respiratory Syndrome (SARS) outbreak in Hong Kong and Hurricane Katrina in America (see chart 2), but recovered soon after. The 1918 Spanish flu epidemic also led to a baby bust the next year, but birth rates increased again in 1920. The effect held globally, from Scandinavia to Japan, suggesting it was not just the end of war driving the resurgence. Couples were having the babies they put off.


In New York there are already signs that couples are trying for sprogs once again. Edward Nejat, a fertility doctor at Generation Next Fertility in Manhattan, saw a drastic drop-off in patients in March that he puts down to uncertainty. 

His practice did not close but 95% of his patients chose not to pursue treatment during the first wave. He is now seeing more patients than before the pandemic. “For most people this was a pause,” he says.

But that might not always be possible. In southern Europe the effects of the last economic crisis are still being felt among a generation that reached adulthood then, who have struggled to find stable jobs or buy homes. 

For those now in their late 30s, biological clocks are ticking, says Francesca Luppi of Università Cattolica del Sacro Cuore in Milan. Recent research by Ms Luppi found 29% of 18- to 34-year-olds in Spain and 37% in Italy who were planning to have a child in 2020 in January had abandoned those plans by March.

Government policy has a role to play here. Besides trying to tackle the pandemic itself, states can seek to ease the economic hardship that covid-19 has caused. They can also subsidise access to contraception, giving women more control of family planning. And they can craft policies for education and child care that make it easier to start a family.

Disasters, like Tolstoy’s unhappy families, are all disastrous in different ways.

Comparing covid-19 to past wars, pandemics or natural catastrophes is only so useful. 

Never before has the world faced such widespread lockdowns for such a long period of time. While people may be more nervous about having children during a crisis, being thrust indoors and banned from mixing with other households might nonetheless make them want them more, suggests Rachel Snow, head of the population and development branch at the UNFPA. 

“Maybe we’re going to see a new appreciation of family life.”

The hidden skills gaps employers must learn to bridge

Many jobs will soon have different core requirements — and the changes go far beyond tech expertise

Andrew Hill

The pandemic is widening the qualifications gap as people who have to downshift take roles that might otherwise have been open to a less educated candidate wanting to get a foot on the jobs ladder © Chris Ratcliffe/Bloomberg


The world is fretting about the looming “skills gap” and its potential impact on economic output. Again. “The [UK] government, of course, is well aware of this threat,” wrote the Financial Times — in 1968.

This is a chronic problem, in other words. But it is entering an acute phase, thanks to the pandemic. Like coronavirus, the skills gap is mutating, in potentially dangerous ways.

The first and most obvious fissure in the future of work is still the one identified in that 1968 report: a dearth of workers (engineers, in that case) with the skills for the jobs of the future. Today’s problem is summed up by a new report from the World Economic Forum: 40 per cent of the core skills in the average job will change in the next five years, it concludes.

Beneath this chasm lurks a second skills gap, between lower-educated, lower-paid, and younger workers, who are disproportionately worse hit by the crisis, and better-paid, older professionals. Outcomes for women are also worse than for men. 

US data show peak unemployment hit 21.2 per cent in April for workers educated to lower than secondary level, falling only to 12.6 per cent by end of August. In each case that was more than double the rate for workers with at least a degree.

What looks like good news for the more highly educated, though, may only be relative. The UK government’s Industrial Strategy Council last year estimated an additional 7m people, or 20 per cent of the workforce, would be under-skilled for their jobs by 2030, but another 1m would be over-skilled.

The pandemic will potentially widen this third gap. I click-and-collected my groceries the other week from a man who had lost his job managing shop refits for a retailer. He was philosophical about the turn in his fortunes. 

“It’s the first time for a while I’ve had no responsibility,” he told me. Similarly, Tom De Silva, who hoped to go into advertising before Covid-19 hit, earned viral fame with a recent mordant tweet about his part-time supermarket job: “4 years ago I was doing trollies at Sainsburys on a Monday night. I left, worked hard and got a degree from the University of Sheffield. 

Now I’m doing trollies at Waitrose on a Friday night. Never give up”.

Through no fault of their own, people who have to downshift in this way worsen the qualifications gap, and take roles that might otherwise have been open to a less educated candidate wanting to get a foot on the jobs ladder.

Conventional wisdom suggests digital skills are the hole in the future jobs market. True, data analysts and specialists in artificial intelligence, big data, and digital marketing top the list of jobs in increasing demand, according to the WEF report. (Its jaunty video about the challenge ahead even offers hope for Mr De Silva, illustrating the need for “customer success specialists” with an animation of supermarket trolleys.) 

But the top skills required for 2025 are broader — such as analytical thinking, complex problem-solving, and creativity — and expose a fourth potential rift in the jobs market.

“There’s going to be a point where all the technology has been built and you no longer need a gazillion software programmers and data scientists,” says Julian Lambertin of KRC Research, who has worked with Microsoft on recent reports about the future of work. Instead, “you will need people who work with the technology” and apply their human, personal and leadership skills.

Companies, governments and educational institutions need to act fast and in a co-ordinated fashion to plug these holes. More than half of working adults fear they will lose their jobs in the next 12 months, according to an Ipsos survey for the WEF.

More optimistically, two-thirds think they can retrain with their current employer. To fulfil such hopes, companies have to meet their side of the bargain and commit resources to valuable on-the-job training even as they are under fierce financial pressure. Saadia Zahidi, co-author of the WEF report, points out that the return on investment in reskilling is fast, “so you would think that the business case is there”. But “businesses are having to take short-term decisions because of the downturn”.

Here, a final skills gap looms — one of the hardest to close. The “things that are easiest to teach and test have also become the easiest to digitise”, Andreas Schleicher of the OECD warned the WEF’s Jobs Reset summit last week.

Yet companies need staff with core social and emotional capabilities — misnamed “soft” skills — that can best be acquired, cultivated and assessed at work. Once out of a job, candidates may find it harder to prove to employers their “active learning” capacity, second on the WEF’s list of top skills for 2025. If they cannot bridge this gap, policymakers, business leaders and educators will still be wringing their hands about the skills shortfall decades from now.

What Happened to American Leadership?

By: George Friedman


International conferences for people in my profession are generally a thing of the recent past, having been replaced by virtual conferences via platforms like Zoom and Webex. I’ve attended three this month alone and many more in prior months. One question has been repeatedly raised, particularly at European conferences: What has happened to American leadership? 

It’s typically followed by another question of whether the United States is returning to isolationism. I am not at all clear what leadership means when there is little following. I am more baffled by the notion of a return to isolationism

It is the concept of a “return” that confuses me, since the United States never isolated itself. It’s true that in the interwar period the U.S. tried to avoid going to war in Europe again. The U.S. became involved in the First World War to block a German victory and then withdrew its troops. 

The U.S. saw this as the war to end all wars, and the Europeans increasingly acted as if it were a truce within one war. The United States did not want to be dragged into another European bloodbath and was in no position to stop what was to the United States an endless European dynamic.

But while the United States sought distance from Europe, it was involved in Asia. It opposed Japan’s invasion of Manchuria by providing limited military force to China, engaged with the Philippines and maintained a substantial naval force in Hawaii. U.S. economic measures grew so intense that they triggered the attack by Japan on Pearl Harbor. For Europeans and what I might call Europeanists in the United States, the failure to engage in Europe is deemed isolation, and the substantial engagement in Asia is deemed irrelevant. 

The United States was not engaged in Europe because it reasonably believed it could have little influence there, and that expanding its influence would be too risky. The U.S. did not want to replay WWI, and was drawn into Europe by Hitler declaring war on the United States after Pearl Harbor. It is not clear what the U.S. would have done without this, but the desire not to get trapped in another European bloodbath was neither irrational nor irresponsible.

Once Hitler declared war, the United States inevitably assumed leadership. The American industrial plant was indispensable to Britain and the Soviet Union, and U.S. forces rapidly dwarfed the British in Europe. 

The United States was forced into a Pacific war by Japan and an Atlantic war by Hitler, not altogether by choice. It became the leader in both theaters because of the power it brought to bear. Leadership was the result of an imbalance of power.

After World War II, it became apparent to Washington that without a U.S. presence in Europe, the Soviet Union would dominate the Continent and in doing so threaten U.S. control of the Atlantic. So the U.S. stayed in Europe, sending troops, organizing the economy, rehabilitating Germany and so on. 

Most important, U.S. forces and the threat of nuclear weapons created what turned out to be a prudent if uneasy understanding between the United States and Europe. The U.S. imposed a unity on the fractured as part of this strategy. It was the leadership of the powerful over the weak.

All the while, the U.S. was intensely involved in the Pacific, fighting major wars in Korea and Vietnam that killed nearly 100,000 Americans. This was a unique period of U.S. history seen by allies as the new norm. But the United States was as involved as it was to confront a coalition of communist states. 

In creating an anti-communist coalition, the U.S. bore a substantial economic burden and incurred significant military risk. The only advantage was defensive – preventing the domination of both Europe and Asia by a rival power. Otherwise, there was little benefit.

The collapse of the Soviet Union and the evolution of China after the death of Mao Zedong changed the global reality dramatically. The Europeans signed the Maastricht treaty, which did not particularly concern the U.S., despite having little influence over the negotiations. 

Europe was now free to take its own course. Similarly, Asia (particularly Japan) was booming, and with China redesigning itself there was no reason for a massive presence there.

The American presence at both ends of Eurasia was not triggered by any real economic advantage. It was triggered by the American interest in maintaining the Atlantic and Pacific as buffers against Eurasian threats to the United States. In the 1990s, these threats faded, and therefore a new strategy was required. 

The new strategy emerged slowly. Washington did not abandon Europe; there were no significant enemies to speak of, the European economy was surging, and the need for American leadership weakened. Old habits die hard, and institutions such as NATO continued with a far weakened military capability facing a far weakened threat. 

Europe recognized as much and adjusted its defense policy so that it could focus on economic matters. In many ways, the American presence became anachronistic. In the past decade, the U.S. has focused on an unlikely Russian threat to Europe, placing U.S. troops in Poland and Romania. 

But with the European Union having a gross domestic product roughly equal to that of the U.S. and no significant military threat, the U.S. interest in Europe declines and the European need for the United States dissolves.

The United States is a two-ocean power. During World War II, both oceans mattered. 

During the Cold War, precedence shifted occasionally. Now, the dominant interest of the United States is containing Chinese naval power by controlling its littoral waters. 

The U.S. has a massive alliance system doing just that. Japan, South Korea, Taiwan, Singapore and Australia are formally or implicitly allied. Indonesia, Vietnam and India are not formally engaged but have interests parallel to those of the United States relative to China. 

It creates a line of containment from the Aleutians to the Strait of Malacca and into the Indian Ocean. As in the Cold War, the U.S. strategy is containment, and an alliance structure built around massive American power. 

It is designed to make a Chinese offensive too risky for Beijing while containing China at a high financial cost but low military risk.

So the answer to the original question – “What happened to American leadership”? – is that history has moved on and Europe can and does lead itself. Whatever risks Europe faces should be dealt with through European leadership, and where necessary, a degree of U.S. force can augment it. Interests demand that the U.S. focus on the Pacific, just as it has done since before WWII. American leadership is readily apparent there.

In other words, U.S. leadership goes where the U.S. has significant interest. Europe does not need American leadership in economics or defense. The U.S. has an overarching interest in Asia. 

It has no desire or means to compel significant European action, nor are the Europeans interested in giving it. The threat of a Russian invasion of Europe is small, but the U.S. has made prudent commitments in front line countries.

The U.S. is not isolationist, nor does it intend to be, nor will it be allowed to arbitrate European squabbles. The Europeans lived through a period of massive American economic and military involvement. 

That period is over. 

The alliance structures can stay in place, and meetings can be held with communiques issued, but history has moved on. 

So has the U.S.

Don’t mess up Bolivia’s miracle

A landslide election victory brings peace to the country, at least for now


On october 18th, the owner of a guesthouse on Isla del Sol in Lake Titicaca walked for an hour on a dusty path past Inca ruins to vote in a re-run of Bolivia’s election. He was worried. Last year’s contest had sparked a year of protests, driving up food prices and keeping tourists away. 

This time, polls predicted a runoff between Luis Arce, the candidate of the Movement to Socialism (mas), which held power for 14 years until last November, and Carlos Mesa, a centrist former president. “I don’t care who wins,” said Óscar, the hotelier. “I’m worried about what happens after.”

Most Bolivians shared his fears that violence would break out, especially if a candidate lost narrowly and challenged the result. 

In fact, Mr Arce won by a landslide. With 93% of tally sheets counted, he got 54% of votes, 25 points more than Mr Mesa, who quickly conceded. 

Anti-mas voters gathered in a few cities to denounce “electoral fraud” but dispersed. Peace, if it holds, would be “a little miracle”, says a diplomat.

Also miraculous is the mas’s comeback. Evo Morales, its founder and, from 2006, Bolivia’s first indigenous president, was popular for years. The government spent money from gas exports to reduce by two-thirds the number of people living on less than $1.90 a day. On Isla del Sol Aymara entrepreneurs took advantage of an expansion of credit to build tiny hotels. 

The children of potato farmers and sheep herders became tour guides and boat drivers. But with the end of the commodity boom public services worsened. Corruption proliferated and Mr Morales became more authoritarian. Last October he ran for a fourth term in defiance of a referendum vote in 2016. A pause in the count led to suspicions that he was rigging the election. Protests erupted. Mr Morales fled the country.

Anger soon turned on Jeanine Áñez, the right-wing senator who took his place. She sent the army to quash protests, launched her own campaign and mismanaged the response to the pandemic. Nostalgia grew for the stability of Mr Morales’s early years. Mr Arce, who had been his finance minister, profited from that.

To succeed as president, Mr Arce must try to revive economic growth. He should also avoid weakening institutions and alienating half of Bolivians, as Mr Morales did. None of this will be easy. As a uniter, Mr Arce has begun promisingly. “I am not Evo Morales,” he insists. Whereas the former president was a populist, Mr Arce is a technocrat. 

As finance minister, he kept long hours and few assistants. Middle-class and educated partly in Britain, he has tried to connect with poor voters, cooking pork chicharrones with street vendors. His running mate, David Choquehuanca, is an Aymara intellectual beloved by the mas’s rural support base. He resigned as foreign minister in 2017 and has criticised Mr Morales’s bid for a fourth term.

After his victory Mr Arce promised to “correct our mistakes” and govern “for all Bolivians”. Speaking in the pod of a cable car over La Paz, he said that he would welcome Mr Morales home, but not in a government role. Whether he keeps his word will be an early test of his independence. Both Mr Morales and Ms Áñez used the justice system to jail rivals. Mr Arce promises not to interfere in investigations of former mas officials—including Mr Morales—for corruption, terrorism and electoral fraud. Mr Arce faces a corruption probe.

But promises of presidential restraint will be hard to keep, especially as the mas will retain a majority in the legislature. Mr Arce may face pressure to wage lawfare against members of Ms Áñez’s government. “The pendulum could swing back,” warns Jorge Derpic, a Bolivian sociologist at the University of Georgia.

Mr Arce, who as finance minister presided over low inflation and fast economic growth, must now cope with a slump and empty coffers. He wants to maintain social spending and renegotiate debt owed to multilateral lenders. To lessen dependence on gas, he would build up industries like lithium batteries and plastics. That will take time. “There’s no lithium industry,” notes Alberto Bonadona, an economist. “What we have is salt for a good barbecue.”

Bolivians will not put up with failure. “We’re not ignorant anymore,” says Óscar, recalling that 20 years ago a señor arrived before elections to tell islanders how to vote. 

Now they get news on smartphones. Óscar hopes that Mr Arce stays for just one term. “You can’t sell the same product...year after year,” says the hotelier, who also hawks alpaca jumpers. 

That is a lesson that Mr Morales’s successor would do well to learn.