News: Pivot point for the Biden economy — Vaccine rollout begins

Monday, December 14, 2020

Pivot point for the Biden economy — Vaccine rollout begins — Fed on tap Wednesday

Dec 14, 2020

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Quick Fix

Pivot point for the Biden economy — The great challenge of our era began Sunday as the first Covid-19 vaccine from Pfizer and its German partner BioNTech jetted off from Tennessee and Kentucky on Fed-Ex and UPS planes to initial distribution points around the country. The first vaccinations will occur Monday. It is, God willing, the beginning of the end of a plague that is killing around 2,400 Americans per day.

But distributing the vaccine, and others that will follow, to 300 million-plus Americans will be enormously difficult and take months. Then there is the matter of making sure the vast majority of people actually take the vaccine and don't fall prey to conspiracy theories about it. Perhaps hopefully, President Trump has made a point of taking credit for the speed of the vaccine approval. All well and good. Hopefully that spurs red state voters to take it.

Beyond Trump, the vaccine distribution project and the fate of further economic stimulus will define the early months and perhaps years of President-elect Joe Biden's administration. Biden's win will be confirmed by Electoral College voters on Monday. But the fate of stimulus remains completely in limbo.

Biden could preside over a remarkable boom in the economy next year if stimulus quickly gets where it needs to go and the vaccine distribution works well. Or he could face a double-dip recession if one or both fail.

Brad McMillan, chief investment officer at Commonwealth Financial Network, tells MM: "If we get enough stimulus to replace missing purchasing power like we got during the first Covid wave, then we can reasonably expect a very sharp bounce back … And it could be even sharper this time if the vaccines give people reason to believe that this thing is actually over. We just need to keep the patient on life support until we get there."

Harvard's Megan Greene tells MM of the absolute necessity of further stimulus before the vaccine can be widely adopted: "The entire policy response has been to bridge businesses and individuals to the other side. The vaccine is the other side. … If we can't roll it out effectively or we don't continue to bridge even further until it's rolled out then it would be very difficult to avoid another recession."

GOOD MONDAY MORNING — Welcome to the first day of a critical moment in American history. May God help us get beyond this virus. Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver.

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Driving the Day

First Covid-19 vaccines arrive around the nation … Senate negotiators are expected to release a pair of Covid relief packages as the final push to slam something through this year, perhaps as part of the omnibus spending bill, kicks off. MM remains somewhat hopeful that pieces, including PPP money and more unemployment aid, will make it through by the time Congress leaves town at the end of the week.

But nothing is certain. And whatever gets through likely won't be enough to fully ease the economic slowdown that is now happening and will likely persist until the spring or early summer. State aid and a corporate liability shield for Covid-19 remain obstacles, as they've been for nearly half a year.

ALSO THIS WEEK: FED ON TAP — The Fed will conclude its final meeting of 2020 with a monetary policy statement on Wednesday at 2:00 p.m. follow by a press conference from Chair Jerome Powell at 2:30 p.m. The FOMC is likely to emphasize its commitment to asset purchases and other efforts to boost the economy until vaccines fully arrive. And Powell is likely to implore Congress to boost fiscal support as well. It could be a timely nudge to Congress to get it done.

HACKERS BREACH TREASURY AND OTHER AGENCIES — Our Eric Geller: "Hackers from a foreign nation-state have breached multiple federal agencies, including the Treasury Department and the Commerce Department's National Telecommunications and Information Administration, in a months-long campaign that has stirred concerns of the highest levels of the federal government.

"While the full scope and significance of the breaches remain unclear, their discovery prompted an emergency meeting Saturday of the White House's National Security … A second U.S. official said the attack is believed to be the work of the Russian government, a link also made in multiple news reports Sunday night. The campaign appears to be linked to a recently disclosed hack of security firm FireEye, a leading cyber company that has said the attackers obtained tools used to probe and test weaknesses in computer networks."

VACCINE SHIPS OUT — Our Brianna Ehley: "Pfizer has begun shipping out its coronavirus vaccine in the U.S., with the doses set to arrive at the first tranche of vaccination sites within a day.

"Trucks carrying the first doses of the vaccine, authorized by the FDA late Friday night, started rolling out of Pfizer's manufacturing plant in Kalamazoo, Mich. on Sunday .. kicking off a complex effort to inoculate Americans against a virus that's killed nearly 300,000. FedEx and UPS, along with United Airlines and American Airlines, will help distribute the vaccine to every state, territory, and the District of Columbia, as well as several major cities."

BUT CAN STATES HANDLE THE BURDEN? — WSJ's Stephanie Armour and Scott Calvert: "State leaders say they are short billions of dollars in funding needed to successfully provide Covid-19 vaccinations to all Americans who want to be inoculated by health officials' June goal.

"The federal government is providing the vaccine, along with syringes, needles, face masks and shields. But state leaders say they must hire medical workers, provide community outreach and education, set up vaccination clinics and ensure storage capacity for vaccines. Some states are also concerned about having enough supplies, such as gloves and gowns, to protect health-care workers as well as people getting vaccinated."

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Markets

AMERICA'S SMALL STOCKS ARE LEADING THE MARKET'S CHARGE — WSJ's Karen Langley: "Shares of small U.S. companies have surged past their larger peers for 2020 after last month's furious rally carried into December.

"Fueled by improving expectations for the economy, thanks to promising Covid-19 vaccine trials, the Russell 2000 small-cap index notched its best-ever month in November. Then it kept rising. So far in December it has advanced 5 percent, well ahead of the 1.2 percent rise in the S&P 500 large-cap benchmark. Many investors expect small-cap stocks to continue leading the way."

PRICEY STOCKS MAY YET HEAD HIGHER — The Washington Post's David J. Lynch: "The coronavirus may be killing 3,000 Americans each day while lawmakers bicker over how to help the wounded U.S. economy. Yet stock prices keep powering higher. By one measure, shares are more expensive relative to earnings than they were on the eve of the 1929 crash.

"Three U.S. stock markets hit all-time highs this month, and the value of all global shares for the first time topped $100 trillion as investors bet on a post-pandemic return to normal in 2021. The stock price of rental marketplace Airbnb more than doubled Thursday, even as the Labor Department said nearly 1 million more Americans had applied for unemployment benefits, neatly capturing the tension between a bubbly stock market and grass-roots anguish."

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SIZZLING TECH IPO MARKET LEAVES INVESTORS BEFUDDLED — WSJ's Eliot Brown and Maureen Farrell: "A frenzy has hit the market for newly listed tech stocks. Last week, searing demand sent DoorDash Inc.'s stock up 86 percent in its trading debut Wednesday, while Airbnb Inc.'s shares more than doubled in their debut a day later.

"Airbnb Chief Executive Brian Chesky was at a loss for words in a Bloomberg TV appearance when he was told of the company's opening share price, while multiple investors in the two blistering offerings said they were puzzled by the extraordinary enthusiasm in the market."

In fact, three of the biggest tech IPOs ever happened this year — CNBC's Ari Levy: "Three of the 10 biggest tech IPOs for U.S. companies, in terms of capital raised, have taken place this year. Two happened on consecutive days in the last week, when DoorDash and Airbnb started trading on Dec. 9 and 10. The other was software vendor Snowflake, which had its New York Stock Exchange debut in September."

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Fly Around

VACCINE BOOSTS FED CONFIDENCE THAT WORST-CASE OUTCOMES CAN BE AVOIDED — WSJ's Nick Timiraos: "Federal Reserve officials have something new to talk about at their policy meeting this week: good news. This might sound a little absurd. Covid-19 infections, hospitalizations and deaths are hitting records. States and localities are imposing new restrictions on dining and other activities. Claims for unemployment benefits are rising, and the jobless rate fell in November for the wrong reasons—more workers stopped seeking jobs.

"But last week's emergency authorization by the U.S. Food and Drug Administration of a coronavirus vaccine developed by Pfizer Inc. and BioNTech SE, plus a second candidate from Moderna Inc. also under review, is a potential economic game-changer because it could reduce uncertainty for households, businesses and policy makers."

But the Fed's nightmare year isn't over yet — Bloomberg's Steve Matthews: "The recent surge in Covid-19 cases is hitting workers and curbing the broader economic recovery. Resumed stay-at-home advisories in some of America's biggest cities, such as Los Angeles and Chicago, have been a blow to some businesses still reeling from lockdowns at the start of the pandemic.

"That may push the Federal Open Market Committee to debate changes to its bond-buying program or alter its guidance for future purchases, Fed watchers say. Officials will also update quarterly forecasts for economic growth, unemployment, inflation and for their target interest rate, which is expected to stay near zero through 2023."

EMERGING MARKETS LOOK TO VACCINE ROLLOUT, STIMULUS — Bloomberg's Netty Iadyu Ismail, Livia Yap and Sydney Maki: "Emerging markets are closing in on the final phase of 2020 with investors anticipating further stimulus while keeping a close eye on the rollout of vaccination programs.

"Continued support from central banks and optimism that coronavirus vaccine developments will sustain a global economic recovery next year have fueled a rush to riskier assets, sending gauges of developing-nation stocks, currencies and bonds to six straight weeks of gains."

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