Markets Digest Vaccine News | Phillips Financial

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Markets Digest Vaccine News

Echoes from Monday’s encouraging news about a vaccine continue to ripple through the world – and the markets.

To recap: Drugmaker Pfizer and its partner, BioNTech, announced Monday morning that their Phase III coronavirus vaccine trials indicated a strong 90% efficacy rate with minimal instances of side effects. We’re not out of the woods yet, but good news is good news.The broad-based S&P 500 index and the Dow Jones Industrial Average recorded gains this week. The S&P 500 closed at 3,537.01 on Thursday, up 27.57 points and 0.80% from the previous Friday’s close. The Dow Jones Industrial Average closed at 29,080.17, up 756.77 points and 2.67%.

The tech-heavy NASDAQ Composite closed at 11,709.59 on Thursday, down 1.56% for the week as investors shifted away from companies that benefited from the stay-at-home environment toward areas of the market that had been hurt by it.

Larry Adam, Raymond James’ chief investment officer, said the scale of Pfizer’s feat should not be underestimated, even as there are reasons for caution.

“With Pfizer’s efficacy rate well above the necessary 50% to 60% threshold to achieve population immunity, it is hard not to join the markets in celebrating this scientific feat,” Adam said about the companies achieving a vaccine in less than a year. Prior to this, the fastest vaccine developed took four years.

The announcement came as daily U.S. cases have reached an all-time high, cold weather moves more people indoors and pandemic fatigue increases. Adam warns of the potential return of local and statewide lockdowns if the surge in cases continues.

That, of course, could blunt short-term enthusiasm about a post-pandemic world, but generally the economy has been looking stronger, with recent economic data supporting a rebound in economic activity, even if the speed of vaccine manufacturing and distribution and rate of uptake remain unknown.

“The economy should continue to recover, but the pace will still depend on the virus and efforts to contain it in the coming months,” Chief Economist Scott Brown said.

Europe is providing a case study in new lockdown orders as countries ordered limited lockdowns in response to rising cases. There, as here, the markets have reacted favorably to the vaccine news.

“Normal” could still take some time, even with a vaccine being approved before the end of the year. One way to look at the emergence of normal is through the lens of the energy markets. Energy Analyst Pavel Molchanov said normalization could come gradually, but he expects it could be the middle to the second half of 2021 before some facets of pre-pandemic life return, including demand for transportation and travel. For oil demand, the slump could continue until 2022, he said, and “in fact, full recovery is unlikely until 2023.”

As usual with anything as complex as the global economy and markets, there’s a little salt with the sweetness, but excitement about a vaccine is fully warranted.

“This week’s positive news on a potential COVID-19 vaccine has fueled a sharp rotation within the market,” said Michael Gibbs, managing director, Equity Portfolio & Technical Strategy. “Portfolio diversification is gaining importance once again, as the market becomes less dependent on a small segment of stocks that have dominated the stay-at-home environment. This not only creates more opportunity broadly across all areas of the market, we also view it as a positive for overall market strength.”

Investing involves risk, and investors may incur a profit or a loss. All expressions of opinion reflect the judgment of the authors and are subject to change. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. Economic and market conditions are subject to change. The S&P 500 is an unmanaged index of 500 widely held stocks. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. An investment cannot be made in this index.

Material prepared by Raymond James for use by its advisors.