The Pfizer vaccine announcement saw gold and gold leaf selling, with European stocks rising 5% on Monday. Meanwhile, tech stocks, which were booming during the pandemic, fell 1.5% on the same day that the eurozone market flew last week.
Ocado and Just Eat, a massive rise in delivery stocks, poured 5.21% and 3.36% on Tuesday, respectively. Similarly, e-commerce knocked, Amazon fell 2.87%, and Alibaba fell a noticeable 5.10%.
And Amazon, Just Eat and Ocado posted some impressive recovery on Wednesday (the latter over 6%), while Alibaba went 9% more. The question is whether western tech stocks will follow the lead of Chinese e-commerce giants in the coming months.
Speaking about the discussion of tech stocks and ongoing growth and value stocks, Richard Flux, Money Farm’s Chief Investment Officer, said:
“In the Covid-19 world, don’t forget that digital businesses dominate. They clean up in terms of advertising revenue and sales. Traditional businesses suffer. They have rent, pump oil, borrow shortly, lending for a long time in a world of zero interest rates. And growing stocks crush valuable stocks, at least from a performance standpoint.”
“But in a world after growth begins to recover, alternatives begin to appear. Digital businesses look expensive. Their multiples are high, and their outlook is probably over-hyped (sometimes). And everyone starts thinking about meaningful returns like “trees don’t grow into the sky” or old white proverbs, etc. (as I said about Amazon in 15/16/17/2014). It probably explains why Zoom fell 17% yesterday. ”
That being said, Covid’s situation is far from being resolved. Not only will there be a need to discuss the third wave of Delhi and the further increase in cases and deaths, as seen in Western infection rates over the festive period, it will also need to discuss the difficulties in providing vaccinations.
Certainly, like Kingswood CIO, as Rupert Thompson points out, the Pfizer and BioNTech vaccines are “a big step forward, but not silver bullets.”
There are countless logistical considerations of deploying vaccines on a vast scale between transportation, mass production and storage at extremely cold temperatures.
Similarly, we need to consider who prioritizes vaccines, how long immunity will last, and, importantly, who is actually willing to get vaccinated. Understanding these variables will determine the timeline to control co-bid infections and death. Ultimately, life can return to a similarity of normality.
Certainly there could be further reality checks on high-tech stock. Once the vaccine is delivered, the speed bump could move ahead, both with potential disappointments, as dominance will be eroding by the return of stocks that have so far declined during 2020.
With that in mind, the market certainly made the aggressiveness of Pfizer’s announcement on Monday expensive. While tech stocks may see days in the sun expire, anyone who says the community challenges are right behind us is still premature. E-commerce, consumer technology and games can all be set for a big Christmas period, so writing it down now might be a wrong move.
Assuming the economy can recover, Flax offers a scenario where the vaccine can be stored and administered with almost hiccups, and as the unloved stocks of the 2020s enjoy a revival, Flax generally offers a different outlook on technology and growth stocks.
“If the answer to all three is yes, the value could outweigh the growth. European stocks could beat the US, and the Nasdaq would suffer if it was just a short time. Today’s market suggests that the answer is certainly yes. We had such a day before, and they faded. But this time it may be different.”
