Stocks rocketed out of the gates this week as Pfizer, Inc. and BioNTech announced preliminary COVID-19 vaccine efficacy results that showed the joint venture’s vaccine candidate was more than 90% effective in a recent channel. Furthermore, Eli Lilly also was granted emergency clearance from the Food and Drug Administration for an antibody designed to treat those recently diagnosed with COVID-19. As a result of this double-jolt of news, stocks of companies most poised to benefit from a broader reopening of the economy soared. Notable performance was seen from travel-related businesses, such as airlines and cruise operators, as well as banks and oil exploration and production companies.
While the market saw a rotation into more economically sensitive sectors, investors backed away from information technology. Some of this occurred as investors took profits from recently strong performing technology stocks and moved into beaten down cyclical names. Some this shift was also driven by the prospect of the economy reopening, leading investors to pare back stocks such as Zoom, Netflix, Peloton and others, whose businesses had benefited from more people staying in and working from home during the pandemic.
On the political front, Joe Biden was named President-elect this past weekend as votes showed him with an insurmountable lead in Pennsylvania and Nevada, pushing his total in the electoral college above the required 270. However, sitting President Donald Trump has yet to concede and has furthermore initiated lawsuits in closely contested states. While it remains to be seen whether the lawsuits have any merit, it could inject some volatility back into the market should the lawsuits drag on. It still looks likely that Republicans will keep the Senate, but Georgia’s two Senate seats both will be decided in run-off elections on Jan. 5. Should Democrats win both seats the Senate would be split 50-50 and they would have a majority as Vice President-elect Kamala Harris would cast the deciding vote on any deadlocked legislation. A split Congress – a Democratic House and Republican Senate – would make it more challenging for Joe Biden to implement some of his proposed policies, including a corporate tax increase.
The past several weeks have been undeniably politically charged. However, when the vaccine news was announced this week, it seemed to push politics and potential policy changes completely out of the market’s mind. This shows that while political policy can have sporadic impacts on various sectors of the market, economic strength, consumer spending and the eventual flow through to corporate earnings tends to conquer all at the end of the day. While there is still a long way to go in terms of full deployment and uptake of a vaccine, this week’s news does very much lend itself to hope for a brighter future.
Stay safe and be well.
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Past performance is no guarantee of future results. Investing involves risk and the potential to lose principal.
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November 12 Weekly Market Update
November 13, 2020|