“It’s difficult to fade this move as global risk markets should rally more on what is truly a remarkable breakthrough on the vaccine front,” AxiCorp’s Stephen Innes said Monday, following Pfizer’s announcement that the company’s jointly-developed COVID-19 shot has an efficacy rate above 90%.
“A lot of today’s price action makes sense. The tech-heavy Nasdaq has underperformed, while industrial names are making the most of it,” Innes added, noting that Russell 2000 futures came into the cash session limit up.
Early in the day, Nomura’s Charlie McElligott flagged the likelihood of “tectonic movement” and dispersion.
The analyst commentary is comin’ in hot, as they say. “The results are at least as good as the best-case scenario that the market could have hoped for in recent weeks,” Deutsche Bank’s Robin Winkler said, adding that the efficacy rate is crucial. “This is extremely important and should give the market confidence that Pfizer’s candidate offers a breakthrough in terms of reaching herd immunity at some point next year,” Winkler remarked, adding that “there is a non-linear relationship between efficacy and the vaccination coverage required for herd immunity.”
In simple terms, the higher the efficacy, the lower the herd immunity threshold. Winkler went on to quantify things. “Assuming an R0 of 2.5, 90% efficacy implies that governments would need to reach vaccination coverage of about 60% to reach herd immunity,” he remarked. Apparently, that’s doable next year.
“[Pfizer and BioNTech] have said they should be able to produce 1.3 billion doses — enough to vaccinate 650 million people — by the end of 2021,” Bloomberg reminds you. “Only 50 million doses are expected to be available in 2020.”
Global equities were already at record highs on Biden optimism. The vaccine news will catalyze another leg to the upside.
Now, one rather glaring question is this: What happens to a market that has, for years, relied on secular growth favorites tethered to the “slow-flation” environment when Pfizer has just delivered a deus ex machina? (And the literary nerds among you will call that a misnomer given that good vaccine news was expected, but it gets the point across.)
Kevin Muir, formerly head of equity derivatives at RBC Dominion and better known for his exploits as “The Macro Tourist,” weighed in via a note to subscribers on Monday in which he warned on the possibility (however remote) of a quant quake.
“This morning’s vaccine news has caused a violent shift within the stock market [with] ‘new economy’ stocks getting hammered while ‘old economy’ names are flying,” Kevin said. “Be careful buying that high-tech-stay-at-home-