Markets spent weeks obsessing over the outcome of the US election. Now that it’s clear Joe Biden will be the next president, Wall Street is moving on.
What’s happening: Investors are turning their attention back to the pandemic — namely the search for an effective Covid-19 vaccine, which is crucial to projections that the economy will experience a strong rebound in 2021.
“Focus is likely to begin shifting back towards the vaccine and broader growth outlook,” Goldman Sachs strategists Dominic Wilson and Vickie Chang told clients over the weekend. The “likely delivery” of major vaccine news in the next few weeks, they said, is the “next key event.”
The race: Several potential vaccines are in large-scale trials in addition to Pfizer’s candidate. Last week, a top scientist from Oxford University, which is working on a vaccine with AstraZeneca, said there’s a “small chance” that results from its trials could be ready by Christmas.
Goldman Sachs said before the Pfizer announcement that a “safe, effective vaccine” could send stocks up by another 5% to 10%. Despite the pandemic, that would likely push top indexes to new records.
Of course, there could be stumbling blocks. “Significant delays” of a couple quarters could lead to declines of similar magnitude, according to Goldman, though the investment bank predicts investors would process this news more gradually. There could also be issues with distributing an effective vaccine on a mass scale.
Strategists at UBS told clients Monday that given the worsening virus outlook — the United States is quickly approaching 10 million Covid-19 cases — “quick approval of an effective vaccine” is a key ingredient for markets to keep rising.
“Unless a vaccine comes within a few weeks, slower [economic] data momentum is a real risk to the markets,” the bank said.