Markets staged a surprise rally today after Pfizer and BioNTech announced that their COVID vaccine has been found to be 90% effective in late-stage trials. If you’re only just learning this now, then it’s probably too late to get in on the Pfizer bounce (PFE jumped from $36.40 to $41.92 earlier today, before dropping back to $38.82 at the time of going to press). However, it’s certainly not too late to consider the implications of the news for other sectors.
As Randeep Somel, a fund manager at M&G Investments, put it: “It’s the nature of how positive the data is that has got everyone excited. It’s also the fact that they could have turned around said ‘a vaccine is not possible’, which now this data has seemingly done away.”
Unsurprisingly, the stocks that have done best from the rally are those that were worst hit by the virus: hotel chains, airlines and other travel and transport-related companies. On the other hand, home delivery and teleconferencing services took a hit: Ocado dropped by 14% and Zoom by 16%.
It is important to remember that these are only short term effects, however. The development of a vaccine does not make British Airways an inherently stronger company not Ocado a weaker one. What’s more, the after-effects of COVID are likely to be felt for some time. People have got used to working from home and travelling less. While people will undoubtedly be making fewer Zoom calls and taking more flights post-pandemic, the numbers may never fully return to their pre-COVID levels. In other words: don’t panic and sell your Zoom shares yet.
Similar effects emerged on the commodities markets. Oil prices – which slumped during the worldwide lockdowns – increased by 9%. By contrast, gold dropped by 4%. However, once again, this does not necessarily mean that things are “back to normal”.
As you can see from the chart: the gold-to-oil ratio may have dropped, but it is still significantly higher than the 2018 and 2019 norms.
This is not to be a Debbie Downer, however: the beginning of a recovery is still a recovery, and if you want to get in before the big bounce, now is the time to move.
Disclaimer: This article is written to provide information for general consumption. Investors should not base their investments solely on this article. Investors should consult a professional advisor to determine investment objectives that are suitable to their own circumstances.
