Pfizer’s hopeful news might shape the markets for post COVID-19 World
Pfizer's announcement on 9 November impacted the markets worldwide. The potential end of the pandemic raised questions about what will a post-COVID-19 world look like?
Pfizer dropped the momentum bomb on 9 November (Monday). A 90% efficacy claim of their vaccine after the end of phase 3 trials opened doors to the potential conclusion of the COVID-19 pandemic. Markets all over the world reacted overwhelmingly to the news. Dow Jones rallied more than 800 points, the single highest climb of a day after June. Sensex touched 43,000 level, Nifty 50 traded at 12,570 points and FTSE gained more than 100 points.
Despite the overall gain, individual sectors, such as IT, suffered losses. Zoom shares fell by 14% and gold and silver prices also tumbled after rising to record all-time highs as investors now look forward towards riskier equity segments. Spreads of the most unstable US corporate bonds were the tightest since February.
Yunnan Metropolitan’s USD bond descended most, YUNMET Sank to 59.4 cents. The rise in Equity Segment was in contrast to instability in the bond market.
Why such a mixed reaction to positive news? This jumbled response makes us wonder.
Pre COVID Segments gaining
State of complete lockdown and restricted movement threatened the sustainability of businesses we assumed were reliable and stable. People betted heavily against companies invested in oil, transportation, energy, real estate, financials and utilities.
US crude oil fell dramatically in April to a negative value for the first time in history as stockpiles flooded storage facilities. Airlines parked their planes due to travel restrictions and demand for oil plunged sharply. Investors continued to bet against even after restrictions eased worldwide.
On 9 November (Monday), bearish traders rushed to square off their positions, Brent crude futures were up 48 cents or 1.1% to $44.09 a barrel in the anticipation of covid recovery. Delta airlines and Disney also soared after the vaccine news with expected volatility that will be seen for all cyclical underperformers.
Real estate is expanding aggressively in an attempt to recover losses suffered during COVID-19 lockdown and FMCG, retail is slowly crawling back to normalcy.
Pfizer’s advanced agreements with the US, European Union and Japan are worth billions of dollars. These transactions and money movement will be absorbed into the respective economies gradually and would bring in jobs and investment opportunities.
Fall in tech segment Market
A COVID-19 free world would mean less dependability on remote access programs and technology. We wouldn’t need applications like Zoom and Google Meet as much. Restrictions on public gathering and lockdowns made us heavily use online service providers and digital alternatives of everyday things and services which require a physical presence. The news of a potential working vaccine made investors think this ‘stay at home’ lifestyle would revert to how things were pre-COVID-19.
E-signature company DocuSign saw improved interest this year as more people are conducting work virtually. Revenue bounced 45% in the company’s current quarter as billings climbed 65%. Similarly, Wix and other web development services also had higher traffic as more and more businesses entered the digital marketplace to stay afloat.
Amazon, Microsoft and Alphabet also suffered a fall in stock prices. Investors value equities and other investment options according to their ability to generate income. This fall in tech equity segment is only a momentary reaction as this pandemic has conditioned the populace to heavily integrate technology in everyday life.
After this short correction, we will witness a reinforced advancement in the tech sector, the arrival of 5G, more advanced AI developments, companies such as Apple launching high tech augmented reality gadgets, Richard Branson’s successful and possible expansion of Hyperloop transportation and Elon Musk’s Spacelink. We are stepping into the next generation of tech advancements and perhaps the end of COVID-19 might be the commencement of the fourth industrial revolution.
Poor are even Poorer
COVID-19 widened the gap between the rich and the less fortunate. People without an education suffered the burns much more than educated. Recovery has been easier for people with a bachelor’s degree, while those who work in labour markets are still mostly unemployed or are at greater risk of catching COVID. Prolonged unemployment can cause de-skilling, diminishing productivity, and missed opportunities. Financial recovery will become an impossible feat for some.
Such widening economic gaps threaten potential, even further consolidation of power and resources.
Lessons to learn
The world after COVID-19 will not be the same as the world before the pandemic. Humans have evolved their methods and facilities after every calamity. We will now witness a greater focus on healthcare, insurance, biotech and logistics. Practices we adopted after covid will become more refined and the gap between technology and biology will shrink.