It’s All About Vaccine Efficacy Rates Now
Last Monday, the Dow soared 834 points (2.95%), the S&P 500 rose a robust 1.17%, and the Russell 2000 rose a crazy 3.7%, all on the news that Pfizer Inc. (NYSE:PFE) and BioNTech’s COVID-19 vaccine was 90% effective.
For the week, the Dow ended up 4.1%, the S&P 500 notched a new all-time closing high at 3,585, up 2.2% on the week, and the Russell ended the week up a stellar 5.4%.
The Nasdaq Composite didn’t fare so well. It was down 1.53% last Monday and down 0.6% on the week.
This morning we’re off to the races, again. It’s now Moderna Inc. (NasdaqGS:MRNA)’s turn to wow markets.
The company announced its COVID-19 vaccine looks to be 94.5% effective. That’s staggering.
For some perspective, the measles vaccine was 93% effective and essentially wiped out that plague.
Investors are taking profits in tech stocks and buying “value” and “reopening” stocks like never before.
Even if the “rotation” isn’t unexpected, the speed at which it’s happening is unprecedented.
Your Next Move
For example, on Monday last week, according to JPMorgan Chase analysts, buying the cheapest stocks (the beaten-down reopening stocks, known as value stocks mostly because they’re cheap) and selling the most expensive stocks (the tech stocks and work-from-home stocks) would have netted you a 6.4% gain on the day.
Conversely, owning the stocks that had been momentum winners since the virus crisis and being short stocks with negative momentum because they were so out of favor would have hit you with a 14% loss on Monday.
Those are insane one-day gains and losses, but more importantly, they’re warnings that volatility is out there – even if the VIX says its diminishing.
The flood of money, the capital waves into “value” stocks is like a mini tsunami. It’s not quite the same for capital exiting tech stocks; there’s money coming out of the tech sector, but it’s more profit-taking and position-resizing than anything like wholesale selling.
Tech’s going to hold up; in fact, the more the solid names get taken down, the more attractive they are.
We should be buying into them on all these dips.
Value on the other hand is subjective.
Just because stocks are cheap doesn’t mean they’re pumping out earnings and no one’s noticing.
It means they’re not making money, or losing money, but because their stock prices have been so low, they look to be good values “down here.”
The trouble is “down here” is gone; the Russell 2000 made an all-time-high last week.
A lot of the stocks that were cheap in May, June, and even through July and August when they started to move, aren’t cheap anymore.
That means the not-so-cheap stocks are getting bid up because their earnings are supposed to start picking up, with deployment of the vaccine and the economy reopening.
While there’s certainly a lot more to go to the upside, for a lot of the value stocks, it’s not going to be as easy as throwing darts.
Buy good companies with real prospects for really making money in a reopening. Buy a lot of those. But don’t forget to use stops, take profits when you get big winners, and use call options to play further moves higher.
That way you’re ringing the register, positioned for more, even bigger percentage gains, but won’t lose much if we slip back, if there’s suddenly a hiccup in any of the vaccine trials.
Now, as we look to what the end of this year will bring and what hopes we have for next year, we all recognize that life is changing.
Paradigm shifts are taking place before our eyes, impacting the way we live, work, and play, which means that billions upon billions of dollars are on the move, creating what I call “hyperdrive events.”
These hyperdrive events are my specialty; my forte is predicting the winners (and losers) who’ll come out on the other side of these capital waves.
And I’m going to tell you all about them this week… and how you can have the chance to make the most money possible off of them.