Covid-19 vaccine delivers adrenaline boost for stockmarkets

The news that 50 million doses of Pfizer's Covid-19 vaccine could be ready by the end of the year and 1.3 billion by 2021 has sparked euphoria on world markets.

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%.  

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.”

Recommended

The coronavirus is scary – but it's irrelevant to your investments
Investment strategy

The coronavirus is scary – but it's irrelevant to your investments

The spread of the coronavirus is causing alarm around the world. And, while it could be a serious short-term threat to human health, it’s not somethin…
24 Jan 2020
The return of the commodities supercycle
Commodities

The return of the commodities supercycle

With copper prices recently hitting a seven-year high, we could be heading for a new commodities supercycle.
4 Dec 2020
What today's investors can learn from the bear markets of the past
Investment strategy

What today's investors can learn from the bear markets of the past

Several key patterns emerge from a look at previous downturns, says Max King. The upshot is that fortune favours the brave – but don’t panic if you mi…
4 Dec 2020
Investing in Japan: much more than just a bet on a global rebound
Japan stockmarkets

Investing in Japan: much more than just a bet on a global rebound

Jonathan Allum, one of the finance industry’s longest-serving and most experienced observers of the Japanese market, talks to Merryn Somerset Webb abo…
4 Dec 2020

Most Popular

Time for investors to be fearful, not greedy – and sell?
Investment strategy

Time for investors to be fearful, not greedy – and sell?

The Covid-19 crash proved a great investment opportunity. Does the vaccine mean it’s time to sell?
23 Nov 2020
How to avoid inheritance tax by giving your money away
Inheritance tax

How to avoid inheritance tax by giving your money away

Ruth Jackson Kirby explains how to avoid inheritance tax by passing money on to your family while you are still here.
24 Nov 2020
Once Covid-19 is over, we’re going to see an economic boom
Investment strategy

Once Covid-19 is over, we’re going to see an economic boom

After the dust from the pandemic has settled, we’re in for a consumer boom and a huge bout of government spending, says John Stepek. Here’s how to tak…
24 Nov 2020