The S&P 500 could gain 5% by the spring if US states boost vaccination rates, says the world's largest wealth manager

• UBS says the pace of COVID-19 vaccinations will be a key driver of stocks in 2021.

• The firm estimates the S&P 500 could gain 5% by the spring if the current pace of doses doubles.
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UBS sees the pace of vaccinations as a key driver of stocks through 2021, similar to how shifts in mobility and COVID-19 cases drove markets in 2020.

Using a model that tracks the relationship between equities and the pace of the vaccine rollout, the world's largest wealth manager forecasts the S&P 500 could gain up to 5% by middle of the second quarter if the US ramps up vaccination rates.

As of Wednesday, the current pace of over 800,000 doses per day in the US is well below original government estimates. US states have administered just 40% of the allocated supply of vaccine doses, which means there's potential for the pace to double. If that pace doubles, 33 million Americans could be vaccinated with both doses by April, according to UBS forecasts.

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This doubling of the current dose per day pace would also push the the S&P 500 to new highs, while also leading to a 6%-9% gain for the Russell 2000 small cap index, said UBS.

Smaller US states including West Virginia, Alaska, and the Dakotas have the highest vaccination rates, while 10 of the 12 largest US states have a vaccination rate below the average, with Georgia and California lagging the most. UBS said this suggests the US vaccination rate can improve as larger states overcome bottlenecks and catch up.

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