ALL POSTS PRIOR TO 2021 HAVE NOT BEEN REVIEWED NOR APPROVED BY ANY FIRM OR INSTITUTION, AND REFLECT ONLY THE PERSONAL VIEWS OF THE AUTHOR.
December 14, 2020
~ A SCHOLAR FINANCIAL SPECIAL REPORT ~
PART ONE: COVID-19
From Dr. Ron A. Rhoades
E-mail: ron@scholarfinancial.com (clients and prospective clients only)
E-mail: ron.rhoades@wku.edu (students, family, colleagues, friends)
Monday, December 14, 2020
Dear Clients, Students, Family and Friends:
If I had a theme for this edition of this Special Update, it would be: “The Winter of Our Discontent.” Yet, looking ahead to mid-2021 brings renewed hope for … a return to “normal”?
If I had a singular message for you, it would be this ... continue social distancing and the wearing of masks. Gatherings of family and friends at one's home turn out to be responsible for 70% or more of new COVID-19 cases. It’s clear that “even modest size gatherings of family and friends in a home” are contributing to spread, Dr. Anthony Fauci recently said. “We’re starting to see infections that are emerging from what otherwise seemed like benign settings, namely a typical gathering." Even Dr. Fauci won't be spending Christmas with his three grown daughters - the first time in 30 years, he states.
Be patient! As this Special Update explores, the COVID-19 pandemic will likely peak in the United States in mid-January. It will likely take at least a few months for the number of cases to decline. While vaccinations have begun, it will be several months - and perhaps longer - for many Americans to be vaccinated.
In the two parts of this Special Update, I explore recent news about the vaccines for COVID-19, the recovery of the economy and future prospects, and the recent rise of stock market. I also delve into the implications of low interest rates on investment portfolio returns, and suggest a “three-layer cake” approach might work best in the years ahead.
In Part One, I focus on the recent news about COVID-19 vaccines.
In the near future, I will release Part Two, which will focus on the economy and the capital markets.
Table of Contents
A. COVID-19: HUGE NUMBER OF CASES; PEAK IN JANUARY 2021?
B. THE COVID-19 VACCINES – F.A.Q.S
1. When will the vaccines begin distribution?
2. How do these vaccines work?
3. Are the Pfizer and Moderna vaccines safe?
4. Why do so many Americans state that they will not take the vaccine?
6. Will those who have already tested positive for COVID-19 get the vaccine?
7. Who will get vaccinated first?
8. How many vaccine doses will be available in the United States?
9. How long will it take, following vaccination, for a person to achieve immunity?
C. News From Ron and Cathy
A. COVID-19: HUGE NUMBER OF CASES; PEAK IN JANUARY 2021?
· This chart, from The Institute for Health Metrics and Evaluation (IHME), an independent global health research center at the University of Washington, estimates that a rapid rollout of the vaccine for COVID-19 will likely result in a peak of infections in the United States sometime in mid-January. (The daily death total would likely peak a couple of weeks later.)
· By the end of April 2021, the current surge in cases will largely be abated. By late June the number of new cases should be very few, assuming the vast majority of persons in the United States will choose to be vaccinated and that the vaccinations occur as rapidly as planned.
· According to John Hopkins, about 16,000,000 in the United States have contracted COVID-19. According to the CDC, the actual number of cases in the United States is likely two to seven times greater than the reported number of cases. With a current U.S. population of about 330 million, this likely means that about 15% to 30% of those in the United States have already contracted COVID-19.
· How about worldwide? According to John Hopkins, as of December 13, 2020, 70,957,979 cases of COVID-19 (in accordance with the applied case definitions and testing strategies in the affected countries) have been reported, including 1,605,595 deaths. (The actual number of cases and deaths are likely much higher.)
B. The COVID-19 Vaccines – F.A.Q.s
By far the most positive news in recent weeks has been the data from two vaccine studies, demonstrating that 95% of those who received the vaccines developed immunity. While this data is based on an ongoing trial, the efficacy percentage far exceeds what some experts predicted. Moreover, the studies indicated high degrees of effectiveness even in the elderly persons who received the vaccine.
The ideal vaccine would accomplish three endpoints: prevent infection, reduce the severity of the illness if someone does get the disease, and interrupt the chain of transmission. Early results of Phase III (the last phase) trials indicate very high probabilities that both the Pfizer and Moderna vaccines will substantially achieve these objectives.
1. When will the vaccines begin distribution?
One vaccine (from Pfizer-BioNTech) was approved for distribution on December 12, 2020, and vaccinations will begin today (Dec. 14, 2020) for those with highest priority. The approval was for individuals age 16 and older only.
Another similar vaccine from Moderna will be subjected to reviews in the United States commencing this coming week.
Different vaccines from Oxford/AstraZeneca and Johnson & Johnson are expected to result in sufficient data for efficacy and safety reviews by February 2021. An updated analysis of early data from the Oxford/AstraZeneca trial, released this past week, appears to indicate that this vaccine was deemed to be 70% efficacious. Johnson & Johnson has not released its preliminary data.
Another 9 vaccines are in Phase III trials around the world.
2. How do these vaccines work?
Generally, vaccines teach your immune system to recognize the coronavirus. When you get the vaccine, your immune system makes antibodies (“fighter cells”) that stay in your blood and protect you in case you are infected with the virus. You get protection against the disease without having to get sick.
Both the Pfizer and Moderna vaccines are based on a new technology, mRNA. But their “newness” does not imply a lack of safety; in fact, due to the process by which these mRNA vaccines generate antibodies, mRNA vaccines are likely safer than conventional vaccines.
Conventional vaccines usually contain inactivated disease-causing organisms or proteins made by the pathogen (antigens), which work by mimicking the infectious agent. They stimulate the body’s immune response, so it is primed to respond more rapidly and effectively if exposed to the infectious agent in the future.
RNA vaccines use a different approach that takes advantage of the process that cells use to make proteins: cells use DNA as the template to make messenger RNA (mRNA) molecules, which are then translated to build proteins. An RNA vaccine consists of an mRNA strand that codes for a disease-specific antigen. Once the mRNA strand in the vaccine is inside the body’s cells, the cells use the genetic information to produce the antigen. This antigen is then displayed on the cell surface, where it is recognized by the immune system.
From the standpoint of stopping the pandemic, when enough people in the community can fight off the coronavirus by possessing antibodies, the spread of COVID-19 will substantially decline.
3. Are the Pfizer and Moderna vaccines safe?
Early indications are that the Pfizer and Moderna vaccines are very safe, with only mild side effects following injections in a relatively small number of cases. Some who received the vaccine reported short-term, mild-to-moderate pain at the injection site, fatigue, and headache. However, the incidence of serious adverse events was low and was similar in both the vaccine and placebo groups.
While early data on both the Pfizer and Moderna vaccines indicate a high degree of safety, the emergency approval process currently underway for two vaccines is based on only two months of phase III testing data. A full vaccine trial usually takes a minimum of six months.
Still, if you are in a high-risk group (health care workers, over the age of 65, or have certain health conditions), the potential risk from taking the Pfizer or Moderna vaccines appears to far, far outweigh any small degree of risk from taking the vaccines. Those in these high-risk categories are likely to be the first to receive vaccinations (from December through February).
If you are in a lower-risk group, I still suggest taking the Pfizer or Moderna vaccines when they are made available to you (likely February or March of 2021), unless new information comes out indicating a higher level of risk. Based upon information currently available, the potential benefits of receiving these COVID-19 vaccines still appear to far outweigh the apparently very slight risks present from the vaccination itself. The risks of contracting COVID-19 are quite large in comparison, and it is not just the risk of death. Even young, very healthy individuals can suffer terrible symptoms from COVID-19, and have long-lasting health effects after having had COVID-19.
4. Why do so many Americans state that they will not take the vaccine?
Vaccinations against life-threatening diseases are one of the greatest public health achievements in history. Millions of premature deaths have been prevented, any many more have been saved from lifelong impairments to their health.
All vaccinations have risks. Yet, the medical, social, and economic benefits vaccines confer have led all fifty states to enact compulsory childhood vaccination laws to stop the spread of preventable diseases. However, nearly all states allow exemptions from mandatory vaccinations for religious reasons. A growing number of states provide "philosophical" opt-outs from mandatory vaccinations. The rise in parents opting out has led the American Medical Association to express its grave concern, with many experts decrying the rise of so-called "exemptions of convenience."
I would expect many states to require COVID-19 vaccinations in the future (perhaps as early as Fall 2021 in a few states) – at least for children attending public schools. But, again, with “opt-outs.”
Why has antivaccination sentiment grown in the United States in recent decades? In large part this was due to the controversial link between immunizations and autism. Social media and internet sites continue to spread this false information, despite the fact that many, many medical studies have concluded that autism is not caused by vaccines – i.e., there is no link.
But other reasons exist. A major one is the increased lack of trust in science, political leaders, and the health care system. Some individuals, pushed on by misinformation, including right-wing anti-government rhetoric emanating from some opinion influencers, don’t trust that vaccines are safe. But it is not just some “far right” groups who often oppose vaccination. Generations of experimentation on Black Americans and dismissal at the hands of medical professionals have left many Black Americans skeptical of the medical field and wary of taking a vaccine.
In essence, for different reasons, there are just a lot of people (regardless of political affiliations) who don’t trust the health system or the doctors telling them vaccines are safe. These individuals also don’t trust the people who make the policies promoting vaccination. Moreover, changing the minds of those individuals who oppose vacations, due to lack of trust, has been shown to be very difficult.
In these pages I won’t be able to persuade you, if you don’t trust vaccines, to set aside your lack of trust. I can ask that you take a fresh approach the issue of vaccinations with an open mind, re-examine the evidence, engage in a high degree of critical thinking and analysis, and only then reach a conclusion about whether you will receive a vaccination for COVID-19.
In recent weeks the percentage of Americans willing to be vaccinated has risen. Perhaps it is because they know one of the 1 in approximately 1,000 Americans who have died from COVID-19, or have seen this COVID-19’s devastating health effects (even for those who did not die from it). Perhaps they now realize that getting the U.S. economy back on track requires, first and foremost, stopping this pandemic.
Perhaps, however, the recent increase in the percentage of Americans willing to get vaccinated is due to public information campaigns and initiatives targeting other groups, who don’t necessarily oppose vaccinations on philosophical grounds. For example, efforts continue to concentrate on motivating those who are just complacent about vaccinations, removing barriers for those for whom vaccination is inconvenient, and removing barriers relating to incurring the cost of vaccinations.
Whatever the reason for the change in the views of tens of millions of Americans, who opposed vaccinations before-hand but who are now willing to be vaccinated, I am hopeful that the trend continues. We need a very high percentage of Americans (perhaps 70% to 80%, or even more) to achieve some form of immunity from COVID-19 in order to effectively combat this pandemic.
5. Will the vaccine really stop the spread of COVID-19 to those who have not been vaccinated? (I.e., why we still need to wear masks and social distance, even if vaccinated).
At a minimum, the Pfizer and Moderna vaccines reduce the virus’s severity – far fewer people who got the vaccine got sick than those who received the placebo.
As to whether those who received the vaccine are then not able to transmit COVID-19 to others, further studies (currently being planned) are necessary in order to reach such a conclusion. It is logical to think so, but – simply put – the data to answer this question is not yet available.
Until we have data on this issue, we all need to continue to avoid contact with others. That means limiting travel to essential trips, working from home where possible, maintaining social distancing, and --- wearing proper masks!
6. Will those who have already tested positive for COVID-19 get the vaccine?
If you have already had COVID-19, in many states you will have a lower priority as to when you will be eligible to receive the vaccine.
Evidence suggests that if you were already diagnosed with or tested positive for COVID-19, you have likely developed specific antibodies in your blood which may provide some level of natural immune defense. Research is still being done both in the U.S. and globally to determine how long that immune response lasts.
We do not know how long protection will last following infection with COVID-19, or following vaccination. But further information from ongoing clinical trials will become public over time. In comparison, immunity to two similar coronaviruses, SARS and MERS, have lasted at least 3 years. Because of this, as long as supplies of vaccine are limited, people who have had COVID-19 already will likely not be prioritized for vaccination in most states.
7. Who will get vaccinated first?
In the United States, under our system of federalism, it is the states’ responsibility to ensure public safety. As a result, rather than have a “national system” determining vaccination priorities, each state will establish their own system of prioritizing the population.
Still, the U.S. Centers for Disease Control (“CDC”) has issued guidelines, which are likely to be largely followed by most states. The CDC’s Advisory Committee on Immunization Practices (ACIP) recommended, as interim guidance, that both health care personnel and residents of long-term care facilities be offered COVID-19 vaccine in the initial phase of the vaccination program. There are approximately 21 million health care providers, and 3 million residents of long-term care facilities, who will be eligible for vaccinations in this first phase.
While the CDC has not yet indicated which groups will be “next,” an August 2020 recommendation from the National Governors Association panel suggests who might be next:
(Note, however, that the Pfizer vaccine has not yet received an Emergency Use Authorization for individuals under the age of 16.)
8. How many vaccine doses will be available in the United States?
It appears that up to 150 million Americans will be able to receive vaccinations of either the Pfizer or Moderna vaccines over the next six months. That’s less than half the U.S. population, and that is if all goes well.
We can hope that further improvements in the supply chain, or other vaccines that might become available, will increase the number of Americans who can be vaccinated, and possibly speed up the progression of who can get vaccinated.
Pfizer: Over 3 million doses this week; 100 million does over six months (for 50 million Americans to be vaccinated).
The vaccine being produced by Pfizer and its German partner, BioNTech, is a two-dose treatment, meaning that 100 million doses is enough to vaccinate only 50 million Americans. Because the Trump Administration declined last summer to contract for additional doses from Pfizer, it may be June or later before Pfizer/BioNTech can supply more doses to the United States. (In comparison, Europe contracted for 200 million doses from Pfizer/BioNTech, and other countries have contracts in place with these firms as well.)
Moderna: 200 million doses (for 100 million Americans to be vaccinated) by June 2021.
Of the first 100 million doses purchased by the U.S. government from Moderna, approximately 20 million doses are planned to be delivered by the end of December 2020 and the balance will be delivered in the first quarter of 2021. The very recent new order from the U.S. federal government of 100 million doses will be delivered in the second quarter of 2021. These deliveries are subject, in each case, to receipt of an Emergency Use Authorization (EUA) from the U.S. Food and Drug Administration (FDA) for the vaccine.
Other vaccines?
Unknown, and difficult to predict. If the AstraZeneca and Johnson & Johnson vaccines are proven to be safe and effective, it is likely that hundreds of millions of additional vaccine doses will be available in 2021 to Americans.
9. How long will it take, following vaccination, for a person to achieve immunity?
You need to have both doses of the Pfizer or Moderna vaccines to achieve the highest level of protection. These doses are likely to be given two weeks apart. Additionally, it typically takes a few weeks for the body to build immunity after vaccination. That means it’s possible a person could be infected with the virus that causes COVID-19 just before or within days or even weeks after vaccination.
Also, again the early data suggests a very, very high rate of effectiveness for these vaccines – perhaps as high as 95% (or even higher). But neither vaccine will be 100% effective.
C. News from Ron and Cathy.
Cathy and I were hoping plan a cruise for May 2021, but we have decided to put it off for a year or so, just to be safe. We are hoping, however, that we can be vaccinated, and that the data will demonstrate that it is safe for us to visit our clients during the Summer of 2021.
Our new dog, Roxy, who is a 4-year old, 25lb., Scottish Terrier and Wired-haired Dachshund mix we rescued from the local shelter, has proven to be my “exercise guru” as I continue to work from home. Each day she insists on me taking her for a 1-mile (or so) walk. (On a long leash, she walks about 3 miles, while I walk about one mile.)
This past year I received the Gordon Ford College of Business “Teaching Award” for my efforts at Western Kentucky University. I also received an early promotion to Associate Professor, and tenure. The Fall semester was challenging, as I transitioned to fully online classes, but overall my efforts to become good at online teaching appeared to be well-received by my students. I will continue to teach online in the Spring semester, but will return to in-person instruction in August of 2021.
In September I received “The Tamar Frankel Fiduciary of the Year Prize” award, from the Institute for the Fiduciary Standard. My advocacy for higher standards of conduct for all investment and financial advisors continues, along with my legal research and writing on the fiduciary standard of conduct.
I’ll relate more news in Part Two of this Special Update, which will be available within a few days. In addition to discussing the economy, the stock market, and interest rates, I’ll explain the (positive) changes occurring in some of the mutual funds from Dimensional Funds Advisors. I’ll also suggest a layer-cake approach for portfolio management for future years.
Again, if you have any questions, please feel free to contact Cathy or myself, at any time.
All my best.
Ron
Ron A. Rhoades, JD, CFP®
Financial Advisor
Scholar Financial
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