Whatās Going On Here?With the fabled coronavirus vaccine starting to look like a reality, we looked into whether itāll actually make investors feel better. What Does This Mean?The pandemic ā and this is the kind of astute analysis you come to Finimize for ā isnāt over yet: that much is clear from reports of rising coronavirus cases in Europe and the UK, and from the Federal Reserveās calls for the US government to support the economic recovery with more spending. But investors are still betting a vaccine will be approved by the end of this year or early next, and that parts of the global economy will be back at pre-COVID levels by the end of 2021.
A vaccine, economists estimate, would boost US economic growth by 3% and the eurozoneās by 2%. Thatād be great for stocks overall, but itād be particularly good for stocks in a few specific industriesā¦ Why Should I Care?For markets: Stop being so defensive.
So-called āgrowthā stocks ā whose earnings are expected to rise rapidly ā and ādefensiveā stocks ā whose earnings are relatively stable no matter what ā have held up pretty well during the pandemic. But once thereās an economy-boosting vaccine, investors are likely to switch to cheap-looking āvalueā stocks, as well as to ācyclicalsā, whose fortunes tend to rise and fall with economic growth (tweet this). Then again, thereās no pressure to chase those short-term trends: stocks geared toward themes like digitization and renewable energy will likely beat everything else in the long run.
The bigger picture: Doctor, who?
Now thereās more confidence in the timing of a coronavirus vaccine, investorsā focus is increasingly turning to who will be behind it: nine candidates of the original 170 are in the final stages of testing, with frontrunners including Britainās AstraZeneca and Americaās Moderna and Pfizer. Of course, itās anyoneās guess which treatment will cross the finish line first ā let alone how much itāll ultimately earn the company. | 