Publication date: 5 December 2020 | Covering: November 2020
Monthly Briefing
- Pfizer-BioNTech November 9: vaccine 90%+ efficacy announced; Moderna November 16: 94.5%; market-transforming news
- US election November 3: Biden declared president-elect November 7; transition beginning; markets rally
- US COVID winter wave building sharply through November; record hospitalisations in many states
- Fed November 4–5 holds 0.00–0.25%; maintains US$120bn monthly purchases; recovery “moderated”
- BOJ overnight rate at pandemic-era low; Jamaica COVID restrictions; economy under continued strain
- NHT individual ceiling J$6.5 million; rates 0, 2, 4 per cent; housing demand sustained
The Vaccine Breakthrough: Light at the End of the Tunnel
November 9, 2020 produced one of the most consequential announcements in modern medical history. Pfizer and BioNTech released interim Phase 3 trial results showing their mRNA COVID-19 vaccine candidate to be more than 90 per cent effective in preventing symptomatic disease. The announcement — which represented interim data rather than the final trial results — dramatically exceeded the expectations of many in the scientific community and the 50 per cent efficacy threshold the FDA had set as the minimum for authorisation. Moderna followed on 16 November with its own interim results showing 94.5 per cent efficacy for its vaccine candidate. The twin breakthroughs, representing different mRNA vaccine formulations developed independently in parallel, provided overwhelming evidence that safe and highly effective COVID-19 vaccines could be deployed within months.
Financial markets reacted with a significant rotation: equity prices rose sharply, particularly in sectors most damaged by the pandemic — airlines, hotels, hospitality, and energy — while longer-dated Treasury yields rose as the prospect of economic normalisation within 12 months became credible. For Jamaica, the vaccine news was transformative for the medium-term economic outlook. The island’s economy is heavily dependent on tourism, a sector whose recovery is conditional on the restoration of international travel confidence. Vaccines that are highly effective at preventing symptomatic disease, deployed at scale in key source markets including the United States and United Kingdom, would remove the principal constraint on Jamaica’s tourism recovery. The November vaccine news was accordingly the most positive development for Jamaica’s economic outlook since the pandemic began.
US Election and the Biden Transition
The United States presidential election on 3 November 2020 produced a result that major news organisations called for Democratic candidate Joseph Biden on 7 November, following the counting of mail-in and early votes in the decisive states of Pennsylvania, Arizona, Georgia, and Nevada. President Trump did not concede, and his campaign initiated legal challenges to the results in several states. The formal presidential transition process was initially complicated by the incumbent administration’s initial refusal to co-operate, though the General Services Administration subsequently released transition funding. For financial markets, the primary concern was the economic policy implications of the Biden presidency: the prospect of significant additional fiscal stimulus, the continuation of Federal Reserve leadership under Chair Powell, and a return to more conventional multilateral trade and foreign policy.
For Jamaica, the Biden election raised cautious optimism on several fronts. The new administration was expected to take a more multilateral approach to trade and international relations, reducing the uncertainty that trade tensions had introduced into the global economic environment. The prospect of large-scale US fiscal stimulus under a Biden administration supported the external demand outlook for Jamaica’s tourism and remittance-dependent economy.
Federal Reserve November Meeting: Accommodation Maintained
The Federal Open Market Committee held the federal funds rate at 0.00 to 0.25 per cent at its November 4 to 5, 2020 meeting, maintained its asset purchase programme of US$80 billion per month in Treasuries and US$40 billion per month in agency MBS, and noted in its statement that the economic recovery had “moderated in recent months.” The post-meeting statement reiterated the FOMC’s commitment to using its tools to support the economy until the goals of maximum employment and price stability were achieved. Chair Powell acknowledged the uncertainty created by the rising COVID case counts and emphasised the Fed’s readiness to adjust policy if the economic outlook warranted. The November meeting provided no new policy actions but confirmed the Fed’s unchanged commitment to accommodation.
For Jamaica’s mortgage market, the Fed’s continued accommodation sustains the global liquidity backdrop that has kept international financing conditions highly supportive through 2020. The BOJ’s pandemic-era low overnight rate, aligned with global central bank accommodation, provides the foundation for competitive commercial mortgage rates in Jamaica. The NHT’s loan programme — individual ceiling J$6.5 million, rates 0, 2, and 4 per cent — continues to underpin the affordable segment of the housing finance market.
Looking Ahead
The FDA Emergency Use Authorization decisions for the Pfizer and Moderna vaccines are expected in December. The Federal Reserve’s December 15 to 16 meeting will be closely watched for any adjustment to the asset purchase forward guidance. For Jamaica, the December period is the beginning of the critical winter tourism season; performance over the next two to three months will provide an important early signal of whether the vaccine-enabled recovery the industry is counting on will materialise in 2021.
Mortgage & Housing Finance Disclaimer: This publication is for general information only and does not constitute mortgage, financial, legal or investment advice. Mortgage products, lending criteria, interest rates and borrowing costs vary between lenders and may change without notice. Readers should obtain independent advice from a qualified mortgage adviser, financial adviser or legal professional before making financial or property decisions.
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