Stock markets are off to another blistering start this week and have accelerated ahead of the US open after Pfizer’s Covid-19 vaccine update.
European stocks are up between 5% and 8% while Dow Jones and S&P futures are seeing gains of between 3.5% and 5%. The Nasdaq is lagging well behind the others, up only 0.6% on the futures markets, for obvious reasons. Pandemic-proof stocks are likely to underperform as those that have been battered over the last eight months come back into favour. This means the Nasdaq will likely underperform the other indices after spending most of 2020 massively outperforming.
With Covid wreaking havoc across Europe and the US once again, the Pfizer announcement has provided the lift we’ve all craved. The company announced that the Pfizer, BioNTech experimental vaccine is over 90% effective in preventing Covid-19, sending US futures skyrocketing.
This is the news we’ve all been waiting for. The company plans to use emergency use authorization after the safety milestone is reached in late November, with no serious safety concerns having been identified in the interim analysis. Pfizer will then be able to produce 50 million doses in 2020.
We’ve been waiting for this moment for a long time and hopefully others will soon join Pfizer and BioNTech and enable us to break this vicious cycle of lockdowns and cautious reopenings that’s killing businesses, causing rising unemployment and massively adding to the debt load around the world. This is the light at the end of the tunnel moment and just look at the reaction in the markets. One of incredible relief.
The Pfizer moment will be bittersweet for President Trump – who has already tweeted out his delight at the news – after months of claiming a vaccine would be announced ahead of the election. A vaccine should never have become political but it quite clearly has in recent months and I’m sure the President will feel a little disappointed at the announcement coming a week or two too late. Still, this isn’t political and it has been a remarkable effort to get to this point in such a short space of time.
Investors’ view on the Trump campaign’s determination to challenge every key battleground state result and undermine the integrity of the entire election, as nothing more than a distraction continues to fascinate me. The old adage that the market hates uncertainty clearly doesn’t apply this time around, although Trump refusing to accept the result doesn’t change the outcome.
It’s going to take something extraordinary at this point for the Trump campaign to produce something that calls this election into question, not least because Biden’s lead now looks far more comfortable than it seemed at times early last week. The question now is how long investors can ride the wave of the election, given that the near-term outlook remains challenging. Obviously, the vaccine news is a massive plus.
One major supportive factor is probably the additional burden that’s now going to fall on the Federal Reserve, given that any stimulus is going to fall well short of what it would in the event of a blue wave. Powell and his colleagues are used to doing the heavy lifting and that has historically been very good for markets. Some things never change.
Unsurprisingly, they didn’t deem last week the appropriate time for any additional easing but it seems almost inevitable that the announcement will come in December when the dust has settled on the election and they’re armed with new economic projections. They’ll also have a better idea on the fiscal side and latest Covid wave by that point.
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/