Covid-19 Vaccine Development Is Moving the Market in a Big WayBy Jesse Giordano, CFP® | November 18, 2020
Stocks soared recently after Pfizer announced in a press release that its experimental Covid-19 vaccine candidate could be over 90% effective in preventing the virus. (This was later updated to 95%.) While it has yet to receive FDA approval, it could be a step in the right direction for combatting a global pandemic that’s claimed at least 250,000 American lives. The announcement marked a big day for the Dow—which responded by rising 834 points. The S&P 500 also rose 1.2%.
Just one week later, Moderna announced similar news in a press release stating that its vaccine candidate appears to be 94.5% effective. The Dow reacted with a sharp uptick, hitting a new high.
Lots of investors are understandably enthusiastic, but there are still many unknowns that could counterbalance the recent stock rally. This includes the status of a second stimulus package. While many are optimistic that an agreement could be reached in the near future, nothing is set in stone. Meanwhile, a lack of stimulus relief from Congress could pose a real risk to the economy.
With that said, investors have a lot to think about. Here are some key points to keep in mind.
Sectors Seeing the Biggest Gains (and Losses)
The fastest a vaccine has ever been developed is five years, which makes both the Pfizer and Moderna announcements all the more significant. AstraZeneca also expects to have results from its Phase 3 trial sometime this year. This is all to say that the likelihood of a vaccine appears to be getting closer and closer. It’s something that could allow the country to fully reopen, fueling the economic recovery.
Following Pfizer’s announcement, we saw a surge among companies that would presumably do well should the pandemic come to an end. That includes growth sectors like banks and energy, as well as companies that have been hit hard by the quarantine. Movie theaters, airlines and retailers all experienced big jumps. This in itself signals that Covid-19 vaccine development could push investors toward stocks that are related to economic recovery.
Meanwhile, “stay-at-home” stocks saw an initial dip, especially in the tech sector. Shares of both Netflix and Zoom, for example, declined just after the Pfizer announcement.
But despite the optimism around a potential vaccine, the virus itself is still raging on and threatening the U.S. economy. 2020 has seen two major headwinds—the election and the pandemic. The election is over, but we believe the health crisis will not end until a viable medical solution becomes available. Medical experts warn that we could be heading into a very challenging winter as cases continue to rise exponentially. As a result, we may see some states begin to impose further Covid-19 restrictions to slow the spread and buy the U.S. valuable time, which may pose market risk. That might be why many investors are still sticking with stay-at-home stocks and big tech companies, which may be better positioned to ride out another economic downturn.
However, if the past is any indication of the future, we could be coming upon the light at the end of the tunnel. The devastating 1918 pandemic was followed by the economic growth and prosperity of the Roaring Twenties. In the long term, we may experience a big recovery after Covid-19 is behind us and the economy opens up again.
What Covid-19 Vaccine Development Means for Markets
As previously mentioned, Pfizer and Moderna aren’t the only pharmaceutical companies making headway toward a potential vaccine. At this point, there are 10 other companies in Phase 3 trials from across the globe. We’re also seeing advancements in coronavirus treatments and therapies. The FDA just recently greenlighted Eli Lilly’sencouraging antibody treatment for mild to moderate cases.
Be that as it may, there’s still a long way to go before a safe and effective vaccine is widely available. Pfizer plans to produce up to 50 million doses by the end of this year, and up to 1.3 billion in 2021. It’s important to keep in mind that these are global numbers, which means it remains unclear exactly when a vaccine will be available to the masses in the U.S. President-elect Joe Biden predicts that it won’t happen until well into 2021. Still, Moderna expects to have roughly 20 million doses ready for the U.S. by the end of the year. Globally, it’s planning to manufacture 500 million to 1 billion doses in 2021.
Until then, markets could experience further volatility if new cases continue to surge. Although a post-election stimulus might help right the ship again, assuming Congress can reach a deal. In other words, we’ll have to wait and see. In the meantime, the unemployment rate fell to 6.9% for October 2020, which is certainly good news for the economy.
Next Steps for Investors
Markets reacted strongly to the news that the world may be getting closer to a Covid-19 vaccine. With so many moving parts at play, now might be an ideal time to connect with your financial advisor. They may suggest rebalancing your portfolio or making other adjustments given all that’s happening in the markets right now. Between the presidential election and the market’s reaction to a potential vaccine, your portfolio might benefit from a thorough review.
At Opal Wealth Advisors, we help investors cut through the noise and make informed decisions that are designed to support their long-term goals. This includes positioning their portfolios for the economic recovery. Contact us today to see if now is the right time for a financial check-in.
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