After what feels like a lot longer than 8 months since the first lockdown, when we were told to “stay at home and save lives”, there is now a glimmer of hope that life might soon start returning to normal.
Last week, Pfizer/BioNTech and Moderna, two companies that are behind two out of the 11 vaccines currently in their final trial stage, announced preliminary results. Their initial findings show that both vaccines have an encouragingly high efficacy rate against Coronavirus and are over 90% effective in preventing infection. As a comparison, the flu vaccine is only around 40-60% effective.
Without going into too much detail, both vaccines are mRNA (Messenger RNA) vaccines which is a new technique. The genetic material of the virus is injected into the body giving the immune system a preview of what the virus looks like, without actually causing infection. This triggers the immune system into designing powerful antibodies to combat the real virus should the individual become infected.
Unsurprisingly, financial markets reacted very positively to the announcements as the initial results indicate that the rate of effectiveness is far higher than was originally anticipated.
Value stocks, such as banks, oil & gas, and industrials, were not only hit the hardest during the lockdown-induced March sell-off, but also did not bounce back as well during the recovery. In contrast, growth stocks, including tech companies and healthcare, were not only more stable during March but have also seen strong performance throughout the rest of the year.
Following these vaccine announcements, we have seen a short, but very sharp, reversal in this trend and value stocks have made a strong comeback. In fact, global value stocks outperformed growth stocks by the biggest one-day margin ever recorded on the day the announcement was made by Pfizer.
Source: FE Analytics, data compiled by Taylor Money. Growth is represented by MSCI World Growth Index. Value is represented by MSCI World Enhanced Value Index.
There are still several unknowns surrounding both these potential vaccines. We still do not have a clear understanding of their effectiveness across different age groups, whether they stop transmission, and how long the vaccine provides immunity for.
Also, wider questions remain around vaccines being a silver bullet to the global pandemic. The storage and widespread distribution of an effective vaccine is a huge logistical task with many potential speed bumps along the way.
However, few times in history has mankind been collectively pulling together in such a way as we are today. Though there are many questions still to be answered there is clearly light at the end of the tunnel.
Written by Sam Chedzoy and Jonty Brooks
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