Things are starting to look up in the UK (famous last words!). Recent data indicates that between 35 and 40 per cent of the population have received at least a first vaccine dose. Depending on where you are in the country you can, for the first time in months, get your hair cut.
Things are not of course so rosy elsewhere in the world. The vaccine roll out in the EU has been stymied by the suspension of the AstraZeneca vaccine across many of the largest counties in the region. Some countries are tightening lockdown restrictions as a third wave gathers strength.
When we make decisions, we tend to be swayed by what we remember. What we remember is influenced by many things including beliefs, expectations, emotions, and feelings as well as things like the frequency of exposure.
The availability bias as it is known can substantially and unconsciously influence our judgment. We too easily assume that our recollections are representative and true and discount events that are outside of our immediate memory.
Behavioural psychologist Daniel Kahneman writes: “People tend to assess the relative importance of issues by the ease with which they are retrieved from memory—and this is largely determined by the extent of coverage in the media.”
Our assessment of how the world is opening up reflects how our world is opening up, and how things have changed, or not over the past twelve months. It doesn’t necessarily reflect how the rest of the world is fairing.
From the perspective of commodity demand the biggest hit over the past twelve months was of course to oil demand. No one was flying anywhere. Many of us were lucky enough to be able to work from home so had no need to drive. All of which curtailed jet fuel and gasoline demand.
The first signs of light at the end of the tunnel emerged in early November when a number of vaccines were announced. The price of Brent crude has increased by 75% since then to ~$70/bbl; the jump in prices supported, at least in part, on the expectation that everyone would be flying off to the Med this summer. JAB & GO!
That same confidence is reflected in the opinions of asset managers, who when surveyed earlier in March drastically scaled back their risk assessment of the vaccine rollout. Instead, ranking higher than expected inflation as the biggest “tail risk”.
That confidence may now be misplaced. Beware the Ides of March.