Pfizer (PFE) may have discovered the COVID-19 vaccine that the world has been waiting for since this pandemic began. The equity markets are soaring this morning, being led by the cyclical underperformers, while 2020's parabolic tech stocks take a seat on the sidelines for once.
The world has been living in a state of fear about an unseen killer. This microscopic terror put the world into a medically induced recession, but our resilient economy combined with much need monetary & fiscal support has allowed us to recover quickly.
A successful vaccine announcement was the final reprieve that the stock market needed for a full recovery. Pfizer announced a COVID-19 vaccine with BioNTech (BNTX), which has been given an initial effectiveness rating of 90%.
The vaccine news initiated an excess of positive market sentiment today. Other big vaccine players are expected to come out with vaccine results of their own in the coming weeks.
The markets are pricing in the end of the pandemic. This means more foot traffic and less click traffic.
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Market Action
The value-driven Dow index and the broader large-cap S&P 500 are hitting all-time highs today, while the tech-powered Nasdaq 100 is teetering on positive for the day, sitting 2% below the all-time highs it hit in early September.
Today, investors are finally putting their money back into beaten-down names like Delta Air Lines (DAL), Marriott (MAR), Carnival (CCL), and Disney (DIS), which are all seeing double-digit gains today. Cyclical value stocks are finally taking the reins, and those savvy investors that have been buying up these value names are finally reaping the returns.
Stay at home stocks are showing weakness today. Digitally-driven stocks propelled by the work, shop, and live from home initiative are seeing profit-pulling as investors rotate into cyclical underperformers whose uncertain future just got a whole lot brighter.
Quarantine stocks like Amazon (AMZN), Zoom (ZM), Netflix (NFLX), and Peloton (PTON) are all experiencing a pullback today as investors price in economic normality.
What's Next For The Stock Market
The announced vaccine still isn't anticipated to be universally available until 2021, but as we all know, the stock market is forward-looking. What does the ‘new normal' for society look like once COVID-19 is in the rearview mirror?
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I can tell you that it will not be the same world that we left behind in 2019. The pandemic has conditioned society to leverage technology more than ever before. Society has rapidly digitalized in 2020, and that is something that is only going to continue as the 4th industrial revolution commences. Cloud-computing, ecommerce, the internet of things, 5G technology, and artificial intelligence (AI) will be an increasingly significant part of everyday humanity.
When I look to the future, I see a world bound by technology and flourishing from the ease and convenience that it has provided. Despite today's hold on technology stocks, my portfolio is still very much tech-focused.
Final Thoughts
I believe we are getting up to rich valuations as all the major indexes search for new all-time highs today. There is an enormous amount of optimism in the market, and this makes me hesitant to put on any large positions. As Warren Buffett said, “Be fearful when others are greedy.”
Keep your eye on some of my favorite tech names like Alibaba (BABA), Sea Limited (SE), and Twilio (TWLO) for a buy as their share prices stumble towards opportunity.
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