Pfizer’s vaccine for Covid-19 is more than 90% effective in preventing the disease and markets everywhere have rallied. So far the Dow has out-performed the tech-heavy NASDAQ. Travel-related companies and airlines especially have rallied. Aircraft maker Boeing and industrial powerhouses like General Electric have also jumped up in price. How can you best profit from the Covid-19 market rally?
Best Ways to Profit from a Covid-19 Vaccine Market Rally
As we have previously noted, a Covid-19 vaccine will not necessarily be a profitable investment for the long term. For example, Pfizer’s stock jumped up $2 a share from $37 to $39 on the news of their successful vaccine. However, the company has a market cap of $219 billion and a huge list of pharmaceuticals that they produce. If the Covid-19 vaccine turns into a yearly need, Pfizer may add a dollar or two a share to its stock price but much more.
However, the stocks that have been hit the worst by the pandemic are travel-related air travel which has virtually shut down and running a hospitality business is not very profitable when social distancing is a necessity. These are the stocks that are rallying now and likely to continue to rally as widespread vaccination brings the pandemic under control.
While tech stocks have done well with the move to working at home and forced isolation, stocks connected to the general economy have suffered. The increase in stock prices for companies like GE indicates how a general economic recovery coupled with a reduction in Covid-19 cases will fuel general economic growth.
Market Timing of a Covid-19 Market Rally
Shares everywhere rose on the news of a successful vaccine for Covid-19. However, they also fell back partials just as fast. The CEO of Pfizer has said that the company may be able to produce as many as 150,000,000 doses of the vaccine before the end of the year. They anticipate turning out 1,300,000,000 doses in 2021. This is a two-shot vaccination so they should be able to vaccinate 75,000,000 people this year and 650,000,000 next year. While this is good news, the goal is herd immunity. That will require the vaccination of about 200,000,000 people (400,000,000 doses) in the USA and the vaccination of about 5,000,000,000 worldwide with 10,000,000,000 doses world-wide.
What we can expect is a rally on the news of this and other vaccines followed by a fall back. This will be followed, again, by a slow market recovery as the effects of vaccination are felt across the economy.
What about Vaccination Hesitancy?
As many as half of the people in the USA have said they may not want to get a vaccination for Covid-19 as they distrust vaccines. This does not bode well for a long term Covid-19 market rally as the point is to reduce Covid-19 cases and get the economy back to work. With a successful vaccination campaign by Pfizer and others, the best case scenario is herd immunity and a recovering economy by the end of 2021. If half of the population foregoes vaccination, we may be looking at a couple of years more before things return to normal.
As such, the news about Pfizer’s vaccine is excellent but hopes for economic recovery may be a bit premature. Successful investing in a Covid-19 vaccine market rally and recovery may take a bit of patience.
Covid-19 Vaccine Market Rally – Slideshare Version