Pfizer’s vaccine trial has delivered a “shot of adrenaline for the markets”, says Russ Mould of AJ Bell. Fifty million doses could be ready by the end of the year and 1.3 billion by 2021, raising hopes that an end to the pandemic is finally in sight. The news caused euphoria on world markets, with the MSCI All-Country World Index closing at an all-time high and America’s S&P 500 setting a new record on Monday.
The FTSE 100 broke through the 6,000 level, rising more than 6% over the first two trading days of the week to register its highest closing level since June. The pan-European Stoxx 600 hit an eight-month high. Oil prices leapt by 9% and Japan’s Nikkei hit a 29-year peak (see page 7).
The wheel of fortune turns
Yet not all stocks were shining. America’s tech-heavy Nasdaq Composite Index fell by 1.5% on Monday, with Zoom, which has benefited from the work-from-home boom, plunging by almost 20%. By contrast, stocks hit hard by Covid-19 enjoyed a return to favour. In London, food-travel specialist SSP Group gained 52%, with aircraft engine maker Rolls-Royce up 43%.
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The sudden shift away from tech stocks was the “biggest single-day market rotation I’ve witnessed” in 30 years covering markets, says John Authers on Bloomberg. The FAANG (Facebook, Amazon, Apple, Netflix and Google’s parent company, Alphabet) stocks have soared this year, but on Monday they underperformed the average S&P 500 stock by almost 8%. This sudden reversal could be the start of the long-predicted reflation trade, which would see investors shift away from expensive tech and into cheaper, more cyclical stocks.
Rising Covid-19 case numbers on both sides of the Atlantic could yet bring another bout of stockmarket turbulence, says Louis-Vincent Gave of Gavekal Research. But the market is “eager to turn the page” on the pandemic. Talk of a return to normal early next year means we could be heading for “an unprecedented economic rebound”. For long-suffering value investors things are finally looking up (see page 20).
The future is bright
The Pfizer news may prove “the beginning of the end” of the pandemic, but we still have a long way to go, says Cormac Mullen on Bloomberg. The “consensus view” is the same now as before the Pfizer update: a vaccine will come, but it will be “deep into 2021” before it is widely available.
Investors are right to be cheerful, says Robin Winkler of Deutsche Bank. The vaccine’s reported 90% efficacy is “at least as good as the best-case scenario” and government pre-orders mean that Pfizer is well-positioned to meet global demand. Finally, with vaccines from the likes of AstraZeneca and Moderna still in trials we don’t have all our eggs in one basket.
For now, investors are content to bask in the “warm glow” of good news, says Simon Jack for BBC News. Stockmarkets are about the future, and the vaccine results mean tomorrow looks better than today. “While the virus is not yet beaten it is beatable.”
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