Wall Street Week Ahead: Gap between vaccine hopes and pandemic reality poses market hazard

By April Joyner NEW YORK (Reuters) - As winter approaches, U.S. equity investors are weighing brightening prospects for a COVID-19 vaccine against a resurgence of the pandemic across the United States

Reuters November 21, 2020 00:05:51 IST
Wall Street Week Ahead: Gap between vaccine hopes and pandemic reality poses market hazard

Wall Street Week Ahead Gap between vaccine hopes and pandemic reality poses market hazard

By April Joyner

NEW YORK (Reuters) - As winter approaches, U.S. equity investors are weighing brightening prospects for a COVID-19 vaccine against a resurgence of the pandemic across the United States.

Several market strategists have predicted significant gains in U.S. stocks in 2021, as long as Congress passes further fiscal stimulus and a vaccine becomes widely available in the first half. But the path for stocks could be bumpy while investors await those developments, they said.

Over the past few weeks, investors had largely looked past immediate risks from the pandemic. The benchmark S&P 500 index recently soared to record highs on evidence of high efficacy rates in two experimental vaccines - from Moderna Inc and jointly from Pfizer Inc and BioNTech SE. Both vaccines could be ready for U.S. authorization and distribution within weeks, Health and Human Services Secretary Alex Azar has said.

Still, the pandemic remained an immediate threat as the number of U.S. deaths from the disease has climbed to 250,000. The S&P 500 fell more than 1% on Wednesday as New York City announced the closure of public schools.

Economic indicators including a rise in jobless claims last week signaled that the recovery may have stalled, reflecting the need for further fiscal stimulus, some investors said. Data from IHS Markit's flash purchasing managers' index and the Conference Board's consumer confidence survey are scheduled for release next week.

"We anticipate a vaccine becoming partially available this year, but that still leaves a gap," said Colin Moore, global chief investment officer at Columbia Threadneedle Investments.

Further signs the pandemic is growing more severe could stir volatility in U.S. stocks. The Cboe Volatility Index, known as Wall Street's "fear gauge," fell sharply after the U.S. presidential election but has leveled off and remains above its long-term average near 20. VIX futures also reflect elevated expectations for market gyrations throughout the first half of 2021.

Questions about more stimulus have fed volatility expectations, investors said. Two U.S. Senate runoff elections in Georgia scheduled for January could decide which political party controls that chamber and hence the scope of further pandemic relief.

"The big event risk in 2021 might be that's just completely off the table," said Derek Devens, senior portfolio manager of Neuberger Berman's options group, referring to further stimulus. "That would be a pretty negative event for the market."

Some strategists anticipate a bid to haven currencies as a hedge against market declines. TD Securities strategists wrote on Tuesday that they expect the dollar, which has weakened this month, to gain for a brief period in part due to "evolving COVID realities." Societe Generale has recommended options strategies that would benefit from a strengthening in the yen.

But overall, investors largely expect any further slide in U.S. stocks to be fleeting. Restrictions on mobility and economic activity in response to rising COVID-19 cases are likely to be more limited than in the spring, they said. New York City, for instance, has kept stores and restaurants open even as schools close.

Simply seeing a light at the end of the tunnel has helped limit investor anxiety, said David Lefkowitz, head of Americas equities at UBS Global Wealth Management. Even if a stimulus package does not materialize as expected, optimism about a vaccine could blunt any hit to U.S. stocks, in his view.

"There's a pretty clear line of sight to an improvement beginning after the first quarter," he said. "I don't think we're going to see a huge pullback because the market knows that this is a very temporary situation."

(Reporting by April Joyner; Editing by David Gregorio)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.