Dubai: Can global stock markets still feel the buzz of an impending vaccine breakthrough? Investors will certainly hope for a week of relative smooth sailing in the hope that the end game is near in finding vaccines that will cap the COVID-19 once and for all.
Plus, there is the prospect of a smoother transfer of power at the White House, after President Trump gave a grudging acknowledgement of Biden’s win.
Markets were heavily driven over the past two weeks with Pfizer’s vaccine announcement and the US elections. Goldman Sachs has lifted its forecast for the S&P 500 for the coming months. The US bank now expects the index, which closed at 3,585 on Friday, to reach 3,700 by the end of this year and up the 3,600 expected earlier.
The vaccine announcement has projected itself on to the stock rotation that’s taking place – something that investors had been waiting for some time now. The stay-at-home stock winners (Zoom, Amazon, Netflix) will be taking a break from driving market momentum.
The “great rotation” means more money being directed to those sectors where companies were forced to close or to operate at reduced capacity. That includes airlines and cruise lines, hospitality (hotels, resorts and casinos), malls and office REITS, plus the dine-in restaurant sector.
Still, in the short-term, markets will still be affected by the grim reality of drawn-out lockdowns in Europe and the rapidly accelerating coronavirus infection rates in the US. So, investors will still have a wary lookout on any new lockdown by a major economy.
Feeling the love
In the past week, energy stocks surged 16.5 per cent and airlines up 10.5 per cent. The S&P financial sector gained a healthy 8.2 per cent, with commercial banks driving an 11.2 per cent upswing. At the same time, tech declined 0.4 per cent and discretionary consumer stocks were down 1.1 per cent. Stocks in the communications services space was among the weak performers, up just 0.8 per cent
According to a report issued by the London-based Equity Group, the direction of where investors are headed next will also be dictated by how well the a Democrat as president and a mixed Congress can ease any political gridlock.
Retailers are expected to report earnings this week with reports from Walmart and Home Depot due Tuesday and Target on Wednesday.
Another important event is the meeting on Wednesday of the Reserve Bank of New Zealand, as markets will await any decision on a new interest rate cut in light of the second wave of COVID-19.
Among vents that investors await are the third quarter GDP numbers for the UK and the euro area. Any news of a an upswing from the record contraction during the second quarter of the year would rate as a win.