A return to the office, packed flights and full nightclubs may seem like a distant future. But Wall Street has a new message for its clients: It’s time to start thinking about life after the pandemic.
What’s happening: Many riskier assets skyrocketed on Monday after Pfizer and BioNTech said early results indicate their vaccine candidate is more than 90% effective. That raised hopes that vaccines could help normal life resume in 2021, driving a huge rebound in economic activity.
“The strong results from the Pfizer vaccine were better than most expected and [mean] we could be opening back up sooner than expected,” said Ryan Detrick, LPL Financial’s chief market strategist.
The optimism is pushing asset managers to think about making big changes to their portfolios. Before long, they warn, stocks that perform well when people are stuck at home — say, Zoom or Netflix — could fall out of favor, while airlines, hotels and ride-sharing companies may look like smarter picks.
“Investors need to diversify for the next leg, toward more cyclical parts of the market that have lagged behind in 2020, and away from Big Tech and the primary stay-at-home beneficiaries,” Mark Haefele, chief investment officer at UBS Global Wealth Management, told clients Tuesday.
He wasn’t the only one looking ahead.
“We need to shift our attention to those parts of the market that have been the most hammered because of Covid and away from the work-from-home stocks that have had such an incredible year,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. His view: “Covid is not forever.”
Investors on Monday seemed to agree.
- Airline stocks shot up. Delta rallied 17%, while American Airlines gained 15%.
- Disney shares rose 12%, while stock in AMC Entertainment soared 51%.
- SL Green Realty, which invests in office buildings in New York City, saw shares jump 37%.
- Meanwhile, Netflix lost almost 9%, while Zoom dropped 17%. Amazon shares fell 5%.
Of course, recovering from months and months of pandemic losses won’t be easy. Shares of AMC, for example, are still down 48% this year.
And there are still lots of unanswered questions about the vaccine timeline. The public is waiting on safety data from Pfizer, and the company said it’s not sure how long protection from the coronavirus will last. Even if numerous vaccines undergoing late-stage tests prove safe and effective, manufacturing and distributing billions of doses will be extremely difficult.
Plus, the next few months will remain challenging as coronavirus cases continue to rise around the world. For some companies, whatever benefits vaccinations bring may arrive too late. On Tuesday, budget carrier Norwegian Air said it was quickly running out of cash.
But investors are notorious for looking well into the future — and based on the Pfizer news, they like what they see. That may spell the end of the popular work-from-home trades that defined 2020.
