Which global stock market has been strong since 2022? Not the United States, nor China, but those countries that declared the end of the pandemic. For example, in the UK, where the epidemic prevention has long been "flat", the FTSE 100 index has performed best in the main indexes since the beginning of the year, although the Bank of England has entered the interest rate hike cycle. Another example is Australia, whose stock index rose after the government announced that it was "lying flat", in sharp contrast to the decline of us and European stock markets. Further statistics show that since the beginning of the year, the stock markets of "lying flat" countries are better than those not yet "lying flat", and stand out in the environment of fed interest rate hikes and frequent geopolitical risks.
The three conditions have been basically met, and the market starts trading and the "pandemic" ends. First of all, marked by Omicron, the epidemic variant virus may gradually evolve to a low severe rate and low mortality rate. Secondly, with the popularization of vaccines, the complete vaccination rate in major economies continues to increase. As of February 2022, the cumulative number of confirmed cases in the world has exceeded 400 million, and the ability to resist the impact of the epidemic is becoming stronger and stronger.
Moreover, the effectiveness of covid-19 oral drug has been confirmed, and the follow-up promotion will further accelerate the arrival of the "post epidemic" era. Pfizer said its oral drug paxlovid could reduce the risk of severe illness or death by 89%. Oral medicine is a good supplement to the vaccine, which can not only cover the people who refuse to be vaccinated, but also reduce the pressure that the medical system and resources may face when the epidemic comes. According to Reuters data, Australia, which is about to fully open its borders, and the UK and Switzerland, which have cancelled most domestic epidemic prevention measures, are the first countries to order covid-19 oral drugs (Table 1).
In terms of asset performance, in addition to the stock market, the rise of bond yields of epidemic prevention "lying flat" countries is also more obvious. We selected the main countries that gradually liberalized the epidemic control as a sample, and used GDP weighting to construct the stock index and bond yield of epidemic prevention "lying flat" countries (Figure 3). We found that since the beginning of 2022, the stock market of "lying flat" countries has increased compared with the global standard excess return, and the rise of bond yield is more obvious. The reason behind this is that, on the one hand, when the impact of the epidemic continues to decline, the economies that take the lead in unsealing tend to welcome a faster economic recovery; On the other hand, a faster economic recovery will also lead to an earlier start of policy tightening. A typical example is the UK, which grew the fastest among the G7 countries in 2021 and began to raise interest rates at the same time.
Some countries have fully relaxed epidemic prevention policies. As shown in Table 2, since the European Council announced on February 1 that the entry-exit requirements between 27 countries had been relaxed, Denmark, Sweden, the United Kingdom and other places have also immediately liberalized the control. If the vaccine is completely vaccinated or the nucleic acid test result is negative, there is no compulsory isolation after entry. Australia also announced that it would relax entry restrictions on February 21 and that inbound passengers who have completed the whole process of vaccination do not need to be isolated. However, the prevention and control measures in Asia are still strict, and there has been no significant relaxation, and the United States has not relaxed its self isolation policy after entry.
In terms of epidemic prevention and control in China, some pilot adjustments may be made after the two sessions. The severity of China's epidemic prevention policy is still tight among countries with the same epidemic level in the world. Among the top 30% countries with the least new cases in the world, China's epidemic prevention policy severity index ranks second (Figure 4). At present, the vaccination situation in China is good and the epidemic situation is generally controllable. We believe that after the two sessions in 2022, the epidemic prevention policy will usher in a window period of adjustment. As the government accumulates mature experience in each round of epidemic prevention and control, the "dynamic clearing" policy after the two sessions may be adjusted gradually in combination with the local pilot situation.
Risk tips: covid-19 virus mutation, vaccine failure, large outbreak of confirmed cases, leading to economic blockade again; The effect of policy hedging against economic downturn was less than expected
