Strategists Forecast Big Gains Amidst Vaccine News

By Nicholas Knoth

Early Monday (Nov 9th) morning, Pfizer, one of the world’s biggest pharmaceutical companies, and BioNTech, a German biotechnology company, reported that their joint COVID-19 vaccine candidate had been more than 90% effective in preventing infections. This was uplifting news especially since infection rates are reaching new highs around the world. In the announcement, BioNTech CEO Ugur Sahin wrote that the vaccine is “a victory for innovation, science, and a global collaborative effort.”

Later in the week, Moderna, another biotech company, said that it also expects to release an analysis of its 30,000-person vaccine trial before the end of the month. Although there is no evidence that Moderna’s vaccine is effective, investors anticipate that it will have similar results as it uses the same revolutionary mRNA technology that Pfizer and BioNTech use.

Among other experts, Goldman Sach’s chief strategist David Kostin considers this a pivotal turning point in the pandemic, especially in terms of economic recovery. He predicts that this development “will allow society to gradually normalize during 2021.”

Kostin also made some bullish changes to his S&P 500 price targets this week, indicating that he expects the post-vaccine-news bull market to continue through 2021. On Wednesday, Mr. Kostin raised his year-end S&P 500 price target by 4% to 3,700 (the index closed on Friday at 3,537). He also predicts that the S&P will reach 4,300 by year-end 2021 (approximately a 20% increase) and 4,600 by year-end 2022.

JP Morgan also projects a similar forecast, with their analysts increasing the S&P target price to 4,500 by year-end 2021 and 4,000 by early 2021. Following the promising vaccine news on Monday, JP Morgan chief equity strategist Dubravko Lakos-Bujas stated that “the outlook is significantly clearing up.”

Despite the positive vaccine news, the economic outlook is far from certain as infection cases around the globe are quickly rising and reaching new records. In the U.S., for instance, new daily reported cases are now above 180,000 which has prompted the implementation of harsher restrictions across the country. Canada is also reporting higher cases, reaching nearly 5,000 per day.

While these strategists remain positive for a 12-month timeframe, some also caution to prepare for short term volatility. Indeed, SunTrust Advisory chief strategist Keith Lerner acknowledges that although “there is light at the end of the tunnel,” the “[short term] could be volatile”, given the rising infection rates and the possibility of four to six-week shutdowns in the U.S.

Another cause of concern is that Pfizer’s promising vaccine needs to be stored and transported at an extremely low temperature (-70° C) which is significantly lower than typical hospital freezers. Consequently, there are some serious logistical problems that will likely slow down the rate at which populations can be immunized.

Although there are still major hurdles to overcome before reaching a post-pandemic world, the successful preliminary vaccine result is a source of optimism that is well needed around the world. Furthermore, while the market will most likely remain volatile in the short term, there seems to a consensus among the big financial institutions that the long-term economic outlook is clearing up and that we are at least on a path towards economic recovery, expected sometime in 2021.