The S&P 500 SPX, -1.01% has gained about 6% since Pfizer PFE, -2.66% first announced its vaccine was more than 90% successful in treating COVID-19, as has the MSCI World 892400, +0.21%.Philip Lawlor, head of global investment research for FTSE Russell, points out that global economic forecasts for next year haven’t changed very much.
“Some sectors that largely shut down in the spring lockdowns—e.g. auto manufacturing—have learned to keep producing even in a virus-ridden environment. Other sectors that remain depressed for now—e.g. travel and entertainment—are likely to rebound sharply once enough people are vaccinated. This is likely to trigger renewed upgrades in consensus growth forecasts.”
“The fourth quarter of this year will come in weaker than some people expected and so will the first quarter of next year,” Gopinath said. Lawlor said that could generate a fear-of-missing-out rotation trade next year. A pick-up in bond yields should encourage a rotation from quality growth stocks to the COVID-impacted value stocks and financials.