COVID-19 vaccine eclipses US election as economic turning point | News from the United States


President Donald Trump may not have passed the election yet, but investors are.

It started on Monday when Pfizer announced that the COVID-19 vaccine it is developing with Germany’s BioNTech was 90% effective in a late-stage study.

The prospect of a vaccine on the horizon has unsettled Wall Street’s hopes that a revolutionary pandemic is at hand.

As Main Street continues to contend with a slowing economic recovery, record COVID-19 infections, widespread layoffs, and an unemployment rate nearly double its pre-pandemic levels, Wall Street is positioning portfolios for the economy that investors think they will take shape in months.

For many investors, Pfizer’s vaccine news announced that a long-awaited “normalization” is at hand: an economy where consumers skip the RV and book vacations that include flights and hotels. An economy where people watch movies in theaters rather than stream them at home, or let their Pelotons gather dust as they head to the gym to sweat with strangers.

An economy not constrained by the omnipresent scent of bleach.

US President-elect Joe Biden moved quickly to mitigate expectations in the wake of the Pfizer-BioNTech announcement, reminding the country that even if the vaccine is approved, it won’t be widely available for months.

“We are still facing a dark winter,” he warned.

US President-elect Joe Biden moderated expectations following positive vaccine news, warning the nation still faces “ a dark winter ” [File:Leah Millis/Reuters]

That didn’t stop the Dow Jones Industrial Average and S&P 500 indices from hitting new record highs during Monday’s session, as investors ditched tech stocks and other “housekeeping” stocks and pandemic brutalized stocks: airlines, hotels, cruise and theater operators, financial companies.

The “vaccine demonstration” ran until Tuesday for the Dow, which weighs its component companies by price. But the sell-off of the technology has dragged on to the S&P, which weighs its components by total market value.

On Wednesday morning, Goldman Sachs’ portfolio strategists raised their year-end target for the S&P 500 from 3600 to 3700 – good news for people with college and retirement savings plans because the S&P is a barometer for those. Goldman’s note to clients captured how quickly the attention of investors shifted: “A vaccine is a more important development for the economy and markets than the future policies of a Biden presidency.”

This is because Wall Street has shrugged off Trump’s campaign legal challenges to counting the votes and is betting that Republicans will retain control of the Senate (even if it will ultimately depend on two ballots in Georgia on Jan.5).

The bet is Biden’s agenda of tax increases and regulations will be DOA in a divided Congress and a reduced $ 1 trillion package of virus relief aid will be approved shortly after the new year.

But the vaccine rally lost strength by close of trading on Wednesday. Because although hope may be born eternal on Wall Street, sometimes the reality of the moment is so bleak that it overshadows a euphoric prospect.

COVID-19 infections are increasing in the United States, Europe and elsewhere, jeopardizing lives and livelihoods.

The number of new confirmed cases of COVID-19 in the United States surpassed 153,000 on Friday – on the 10th consecutive day, new cases exceeded 100,000, according to Johns Hopkins University.

Hospitalizations of people with COVID also hit a record high on Friday, the COVID Tracking Project said.

California, New York and parts of the Midwest have increased restrictions to contain spiral infections, but as always there is a sting in the tail as these measures promise to further hinder the economy’s march to health.

On Wednesday, the head of Europe’s largest economy, German Chancellor Angela Merkel, echoed Biden’s “dark winter” warning: “As with the Spanish flu, we must now also expect the second wave to be more severe.” he said during a video conference.

On Thursday, Federal Reserve Chairman Jerome Powell further managed expectations about the looming prospect of a vaccine. “From our point of view, it is simply too early to assess with any degree of confidence the implications of the news for the path of the economy, especially in the short term,” he said.

On Friday, however, US equity markets returned to rally mode as investors continued to rally stocks battered by the pandemic.

The S&P 500 was up 1.4 percent to finish at 3,585.15 – a record high, signaling that while the next few months are likely to prove very bleak, investors are seeing dawn at the end of darkness.


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