frugal

Thoughts on how the vaccines will affect the market

So I am writing this on 16 November, the day that Moderna announced that their vaccine has a 94.5% effectiveness rate. At this point, I’m thinking that they are just trying to outdo Pfizer’s vaccine. Although it is part and parcel of competition, these are potential vaccines that will be injected into people, I hope people will not get too amazed by the small sample size.

I trust that the vaccines works

Although the vaccine reports such a high effectiveness rate, there are still many skeptics. For example, the data and test subjects are not peer-reviewed. They are just bold claims from the company. But I would like to give the companies the benefit of the doubt. The vaccines probably work. However, I believe that the vaccines do not actually have such a high actually effective rate because the sample size is so small. (Less than 100 for each company)

Even then, an effectiveness rate of more than 50% would be good enough.

Logistics problems for the vaccines

The Pfizer vaccine has storage problems. It requires a very low temperature to keep stable.

But don’t worry, the Moderna vaccine comes to the rescue! It can be stored in a standard fridge for up to a month. But is it really that simple?

Remember, logistics is not only about storage. What about production of the vaccine? What about the glass vials for the vaccine?

But the market doesn’t care

The market will keep on rising. The news is good. The reaction is great. Investors are already beginning to price in the positive effects of the vaccine.

Given how rushed the world is for a vaccine, the long-term safety of the vaccine seems to be neglected. However, both vaccines seem relatively safe for the time being.

Rotation out of tech stocks

The market has begun its rotation away from technology stocks and into those stocks that are badly hit by the pandemic. This includes stocks like banks, REITS and energy companies.

I believe this is sensible because the high upside of tech stocks has been priced into the market so long ago such that there is no more room for a runup anymore. As investors rotate to recovery stocks, the market will continue to be volatile.

But don’t hold your cash just because it’s volatile. Stay invested into the broad market, and just buy into a low cost index fund. This will let you enjoy the good days.

In any case, I believe that the pandemic is definitely not over. The vaccine news these few weeks seems too good to be true (I really want it to be true, but it does raise some doubt). The market seemed unfazed by the elections (glad that I bought in before the elections) and seems to only react to good pandemic related news. I am as confused as you are. But it’s okay. Just stay invested.

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