2021 was off to a not-so-roaring start, thanks to resurgent global and domestic Covid infections and three more virulent strains of the coronavirus (in the UK, Brazil and South Africa). With much of the developed world locking down over their winter holidays, it was only a matter of time for our beloved National Coronavirus Command Council to follow suit. Alongside the curfew, there was a third booze ban, and, to add insult to injury, the beaches were closed. So much for working on my mask tan.
Following an often bungled approach to lockdown regulations last year (remember the baffling open-toe shoe ban?), the government was at least consistent in its approach to the vaccine procurement. While we (the government) have finally placed our order, not only are we (the taxpayer) reportedly paying much more for vaccines than the early negotiators, we (the government) are left with the question of how to fund it. Despite the private sector and individuals clamoring to assist financially in procuring, distributing, and administering the vaccines, there is now talk of a tax to pay for the vaccines. Moreover, there is renewed speculation of a wealth tax following recent research suggesting substantial revenue gains from this source. A vax-tax would be very vexing indeed.
The good news is that Trump has left the White House and that a far more presidential president (it is all relative) has taken up residency. While there is much fear of a Blue Wave leading to substantial tax hikes in the US, this risk is probably overdone, with the equity market benefiting from a strong earnings recovery.
The big question for this year is whether reflation will trigger tighter monetary and fiscal policy to threaten risk assets. From experience, the last thing central bankers want to do is hurt asset prices. This means it is likely to be another year of low for long in global rates.
In the meantime, please lay low under lockdown, stay safe, and have a happy new year!
- Level 2 B-BBEE contributor
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