COVID-19 Vaccine Update – China’s Sinovac Comes under Scrutiny

Sinovac

This week, clinical trials of China’s Sinovac vaccine delivered particularly disappointing results.

In Brazil, late-stage clinical trial results showed that Sinovac had an efficacy rate of 50.4%. Sinovac had announced previously announced an efficacy rate of 78%.

The sizeable difference between the two sets of results has raised questions over China’s data.

While the efficacy rate sits just above the WHO’s 50.0% threshold, there will likely be the need for a more detailed review for the vaccine to be accepted.

A large number of countries are reliant upon the Sinovac vaccine, having failed to make timely orders of the more effective vaccines available at present.

Brazil, is among countries that have placed orders with Sinovac.

With a larger percentage of healthcare workers in the U.S refusing to take the Pfizer Inc. vaccine, governments may face a harder task convincing its populations to take the Sinovac vaccine.

Such differences in results could raise concerns over vaccine safety, in particular.

The Latest COVID-19 Numbers

At the time of writing, there were a total of 92,767,845 confirmed COVID-19 cases and 1,986,696 related deaths.

By geography, the U.S had reported 23,616,345 cases, with India reporting 10,512,831 cases.

Brazil reported the 3rd highest, with 8,257,459 cases, followed by Russia (3,471,053) and the UK (3,211,576).

France (2,830,442), Italy (2,319,036), Spain (2,176,089), and Germany (1,980,861) reported a combined 9,306,428 cases.

Looking Ahead

As a result of Brazil’s clinical trial results, we can expect Pfizer Inc., Moderna Inc., and AstraZeneca to come under pressure to deliver more doses worldwide.

On Wednesday, Johnson & Johnson provided some positive news to ease the strain, however.

As clinical trials continue, the firm’s chief scientist provided a positive view of the single dose vaccine.

The company’s chief science officer also announced that the single shot vaccine remains on target for rollout in the 1st quarter. Clinical trial data is due out later this month or in early February.

Johnson & Johnson has set a goal of 1 billion doses of the vaccine to be manufactured this year. There were reports, however, that Johnson & Johnson has experience manufacturing delays that would impact the 2021 target.

With China’s numbers now in question, Russia’s Sputnik V vaccine may also begin to draw greater interest.

COVID-19 Vaccine Update – Vaccination Rates and the Road Ahead

U.S Vaccination Rates

Sentiment towards the available COVID-19 vaccines has been mixed across the U.S.

Over the weekend there were reports of frontline healthcare workers refusing the vaccine. The numbers refusing are far from small, with some reports indicating that as many as 80% are refusing the vaccine in some centers.

The refusal to receive the vaccine comes as the U.S continues to fight an uphill battle against the COVID-19 pandemic.

According to Bloomberg, the U.S has administered 8.02m doses of the vaccine since 14th December. To-date. at least 272,429 recipients have completed the 2-dose regimen.

In all reality, however, the number of vaccinations is low relative to the number of distributed shots.

At the time of writing, Bloomberg reported that 36% of the shots distributed to states have been administered.

Having achieved the target distribution of 20 million doses by the early part of this month, the next goal must be to ramp up the vaccination rate.

At the time of writing, Nevada had the lowest vaccination rate at 23.8%, with Connecticut the highest at 71.8%.

Looking at a number of the more adversely affected states, the number of vaccinations administered are just not enough.

California and Florida had reported vaccination rates of just 31.7% and 44.0%, with New York at 45.9%.

For a full state-by-state breakdown of vaccination rates, please click here.

Concerns over the speed of availability of the vaccine has led to skepticism and an unwillingness to vaccinate in the U.S.

This is in spite of the continued spike in new COVID-19 cases across the U.S.

Global Vaccination Rates

On a global basis, Bloomberg has reported that a total of 25,839,924 vaccines have been administered as at 10th January.

Per 100 people, the U.S has vaccinated 2.44 doses per 100 people.

Elsewhere, the numbers do vary significantly.

Across the EU, number of vaccines administered are particularly disappointing when considering the reintroduction of lockdown measures.

France has reportedly administered just 93,000 doses, which translates to 0.14 per 100 people.

Germany and Spain have done marginally better, with 0.64 and 0.60 vaccine doses administered per 100.

Leading the 4-most adversely affected, however, is Italy, with 1.04 doses administered per 100 people.

Looking at the UK, 2,000,000 doses have been administered, which is equivalent to 2.99 doses per 100 people.

From the weekend, news hit the wires that the UK government plans to open mass vaccination centers in England to ramp up the daily vaccination rate.

This does bode well for Britain and its fight against the COVID-19 pandemic.

Looking further east, Israel leads the charge, by doses per 100 people, in the fight against the pandemic. As at 10th January, Israel had administered 20.08 doses per 100 people, translating to 1,817,000 doses.

The U.A.E came a distant 2nd, with 10.11 doses per 100 people.

Bahrain was also a front runner, with 6.01 doses administered per 100 people, though the population size is significant smaller.

Figures were not available for Brazil and India that sit behind the U.S as the worst hit by the COVID-19 pandemic.

The Economic Recovery

In terms of nations bringing an end to the COVID-19 pandemic, once vaccination rates exceed infection rates, we can expect economies to begin reopening.

Looking at the global numbers, we continue to expect marked divergence in economic recoveries.

Vaccination rates across some advanced economies remain significantly low, suggesting longer than expected containment measures.

The longer that governments need to maintain containment measures, the greater the economic fallout.

This suggests that EU member states may well lag the U.S, the UK, and parts of the Middle East.

We will need more figures, however, to get a fuller picture. From Asia, China’s low vaccination rate of just 0.64 per 100 people, as at 8th January, has not impeded the economic recovery.

China is an anomaly, however, with the government having managed to curb COVID-19 infection rates.

This is not the same story for the U.S, the UK, the EU, and other parts of the world.

We would therefore need to see a marked increase in vaccination rates across the the U.S and the EU at a minimum to support a sharper global economic recovery.

The Latest COVID-19 Numbers

At the time of writing, there were a total of 90,693,444 confirmed COVID-19 cases and 1,943,171 related deaths.

By geography, the U.S had reported 22,917,334 cases, with India reporting 10,467,431 cases.

Over the weekend, the U.S hit another record high number of new cases. On Saturday, the U.S had reported 278,920 new cases, which sits well above the national daily vaccination rate.

Brazil reported the 3rd highest, with 8,105,790 cases, followed by Russia (3,401,954) and the UK (3,072,349).

France (2,783,256), Italy (2,276,491), Spain (2,050,360), and Germany (1,929,353) reported a combined 9,039,460 cases.

Looking Ahead

As governments look to ramp up vaccination rates, availability of doses will become a factor.

At present, the UK is one of few nations that has access to AstraZeneca, BioNTech/Pfizer Inc. and Moderna Inc.’s vaccines.

For the EU, approval of the AstraZeneca vaccine may be pivotal in its fight against the COVID-19 vaccine.

Other parts of the world have begun to accept China’s COVID-19 vaccines, while waiting on delivery AstraZeneca, BioNTech/Pfizer Inc., and Moderna Inc.

Some governments were too slow in placing orders, resulting in lengthy lead times.

The number of doses that China’s two vaccine producers will be able to manufacture are low, however.

Sinovac will reportedly be able to produce just 300 million doses per year. Sinopharm, by contrast, is looking to produce more than 1 billion doses this year.

With the Chinese government having pledged to support Africa and LatAm, more is needed, however.

It, therefore, becomes all the more essential that a 1 dose vaccine is made available. This would ease manufacturing capacity pressures and materially increase the number of people protected from the coronavirus.

Johnson & Johnson

As things stand, Johnson & Johnson remains the front runner in delivering a much-needed single dose vaccine.

According to recent reports, the vaccine could be available as early as next month.

Safety, efficacy, and production capacity will be key considerations along with cost. For nations lagging behind in the fight against the pandemic, a single dose vaccine would certainly ease the pain.

European Equities: A Week in Review – 08/01/21

The Majors

It was a bullish start to the year for the European majors. In the week ending 8th January, the EuroStoxx600 rallied by 3.04%. The CAC40 and the DAX30 weren’t far behind, with gains of 2.80% and 2.41% respectively.

Early in the week, the EU’s approval of the Moderna Inc. vaccine delivered support to the European majors.

Adding to the upside in the week was expectations of more U.S fiscal stimulus to support the U.S economic recovery.

A “Blue Wave” will now allow Joe Biden and the incoming U.S administration to deliver stimulus unhindered. The Democrats won the Georgia run offs, taking control of the Senate.

The upside in the week came in spite of Germany extending its lockdown period and France considering a reintroduction of containment measures.

For the markets, the combination of COVID-19 vaccinations and U.S stimulus expectations was good enough.

The Stats

It was a busy week on the economic calendar.

The private sector, French consumer spending, and the German economy were in the spotlight in the week.

The Private sector

In December, the manufacturing sector saw a pickup in activity, driven by Germany that saw its PMI hit a 34-month high 58.3. The Eurozone’s manufacturing PMI increased from 53.8 to 55.2 in December, down marginally from a prelim 55.5.

New export sales saw a marked increase at the end of the year. painting a rosier picture for 2021.

While the service sector continued to contract, the rate of contraction eased. The Eurozone’s services PMI rose from 41.7 to 46.4 in December, down from a prelim 47.3.

At composite level, the Eurozone’s PMI increased from 45.3 to 49.1, which was also down from a prelim 49.8.

Containment measures across the Eurozone continued to pin back service sector activity at the end of the year.

The German Economy

From Germany, trade. retail sales, unemployment, and factory order figures were also upbeat, supporting the majors.

In November, retail sales saw an unexpected 1.9% rise, following a 2.6% increase in October.

Unemployment figures also impressed, with unemployment falling by 37K in December, following a 40K slide in November.

Economists had forecasted retail sales to fall by 2% and for unemployment to rise by 10K.

Late in the week, factory orders jumped by 2.3% in November, versus a forecasted 1.2% decline. The upside came off the back of a 3.3% increase in October.

Industrial production figures also came in ahead of forecasts, with production up by 0.9%, following a 3.4% jump in October. Economists had forecast a 0.7% rise.

On the negative, however, was a narrowing in Germany’s trade surplus from €18.2bn to €16.4bn in November.

The narrowing resulted from a larger increase in imports than exports, rather than a slide in exports, however, suggesting strong demand.

Exports rose by 2.2%, with imports jumping by 4.7%.

The Rest

Also on the negative was French consumer spending figures. As a result of lockdown measures, spending tumbled by 18.9% in November. In the month prior, spending had risen by 3.9%.

Other stats in the week included December prelim inflation figures and retail sales and unemployment figures for the Eurozone.

These stats had a muted impact on the majors, however, as did the ECB’s Economic Bulletin.

From the U.S

Economic data was also on the busier side.

Private sector PMI and labor market numbers were the key drivers in the week.

In December, the ISM Manufacturing PMI rose from 57.6 to 60.7, with the Services PMI climbing from 55.9 to 57.2.

A 123k fall in nonfarm payrolls in December, according to the ADP failed to spook the markets ahead of the official government figures.

Jobless claims figures eased any major concerns over a further deterioration in labor market conditions. In the week ending 1st January, initial jobless claims slipped from 790k to 787k.

At the end of the week, nonfarm payrolls fell by 140K in December, partially reversing a 336k increase in November.

In spite of the fall, the unemployment rate held steady at 6.7%, with the participation rate holding steady at 61.5%.

Optimism towards the economic outlook, stemming from fiscal stimulus expectations and COVID-19 vaccinations muted the effects of the NFP figures.

On the monetary policy front, the FOMC meeting minutes had a muted impact on the majors, with U.S politics in the spotlight.

The Market Movers

From the DAX, it was a bearish week for the auto sector. Volkswagen slid by 3.63%, with BMW and Continental falling by 2.45% and by 1.77% respectively. Daimler saw a more modest 0.22% loss in the week.

It was a particularly bullish week for the banking sector, however. Deutsche Bank rallied by 6.48%, with Commerzbank gaining 3.80%.

From the CAC, it was a bullish week for the banks. BNP Paribas rallied by 5.06%, with Credit Agricole and Soc Gen rising by 3.39% and by 4.47% respectively.

It was a mixed week for the French auto sector, however. Peugeot fell by 1.30%, while Renault ended the week up by 2.46%.

Air France-KLM reversed a 5.28% gain with a 5.02% slide, while Airbus ended the week up by 0.36%

On the VIX Index

It was a 3rd week in the red from 4 for the VIX. In the week ending 8th January, the VIX fell by 5.23%. Reversing a 5.67% gain from the previous week, the VIX ended the week at 21.56.

For the week, NASDAQ rallied by 2.43%, with the Dow and S&P500 gaining 1.61% and 1.83% respectively.

The U.S majors hit record highs in the week, supported by expectations of substantial fiscal stimulus to support an economic recovery.

Mid-week, the Democrats won the Senate race, giving them control of both houses.

Following chaos on Capitol Hill on Wednesday, Biden was certified as the U.S President, with Trump stating that there would be an orderly handover on Inauguration Day.

VIX 080121 Weekly Chart

The Week Ahead

It’s a particularly quiet week ahead on the economic calendar. Key stats include November industrial production and trade data for the Eurozone.

Barring particularly dire trade figures, expect the industrial production figures to have the greatest influence.

Finalized December inflation figures for France and Spain are also due out but should have a muted impact on the majors.

From the U.S, inflation, the weekly jobless claims figures, retail sales and consumer sentiment figures will influence in the week.

Out of China, expect trade data to also provide direction.

Away from the economic calendar, COVID-19 news and chatter from Capitol Hill will continue to remain in focus.

COVID-19 Vaccine Update – EMA Recommends Moderna Inc. Vaccine.

The Latest

Following the authorization for the BioNTech/Pfizer Inc. vaccine authorization late last year, the EMA was back in action this week.

Today, the EMA’s human medicines Committee (“CHMP”) recommended the COVID-19 Moderna Inc. vaccine for authorization.

According to the EMA, the CHMP thoroughly assessed the data on the quality, safety, and the efficacy of the vaccine.

The EMA recommended by consensus a formal conditional marketing authorization be granted by the EU Commission.

Emer Cooke, the Executive Director of the EMA, stated that the vaccine provides the EU with another tool to overcome the current emergency.

The EMA also noted:

  • A very large clinical trial showed that the COVID-19 Vaccine Moderna was effective at preventing COVID-19 in people from 18 years of age.
  • Efficacy was calculated in around 28,000 people from 18 to 94 years of age. All had no sign of previous infection.
  • The trial showed a 94.1% reduction in the number of symptomatic COVID-19 cases in the people who received the vaccine.
  • Additionally, the trial also showed 90.9% efficacy in participants at risk of severe COVID-19.
  • Healthcare providers must give two injections of the COVID-19 Vaccine Moderna, 28 days apart.

As a result of the recommendation, the EU Commission will now fast-track the approval process.

Once the EU Commission has granted conditional marketing authorization for the vaccine, Moderna Inc. can begin to distribute the vaccine across the region.

Vaccine Orders

Late last year, the EU had ordered an additional 80m doses of the Moderna Inc. vaccine. The latest order was in addition to 80m doses that had been previously ordered.

While the distribution of the Moderna Inc. vaccine likely to commence in a matter of days, the EMA has yet to review the AstraZeneca vaccine.

According to the latest reports, the EMA is awaiting additional data in order to being the review process.

Speed of distribution of the vaccine and vaccination rates will now be key in the fight against the pandemic.

COVID-19 Vaccine Update – The WHO Authorizes the Use of the Pfizer Inc. Vaccine

The Latest

Over the holidays, the World Health Organization approved the emergency use of the Comirnaty COVID-19 mRNA vaccine.

Having been the first vaccine to receive approval by the FDA, the BioNTech/Pfizer Inc. was also the first to receive WHO emergency validation.

The validation is significant as it now allows countries to accelerate approval processes to begin administering the vaccine.

As a result, UNICEF and the Pan-American Health Organization can also begin to procure the vaccine for distribution.

The WHO’s review of the vaccine found the vaccine to meet the WHO safety and efficacy standards.

Additionally, the WHO also requested that other vaccine developers come forward for validation.

COVID-19 cases continue to surge globally as countries struggle to contain the spread of the virus.

Adding to the urgency is the new strain from the UK that is considered more virulent.

While the validation is good news, the Comirnaty vaccine raises logistical and pricing issues. For many countries, the AstraZeneca vaccine will likely be a more viable option. More importantly, AstraZeneca has also engaged vaccine producers across the world to meet global demand.

The World Health Organization’s approval for emergency use of the AstraZeneca vaccine will therefore be a key step in combatting the virus.

Following the UK’s approval of the AstraZeneca vaccine last week, India reportedly approved the vaccine on Friday. Argentina has also approved the emergency use of the vaccine.

The Latest COVID-19 Numbers

At the time of writing, the total number of confirmed COVID-19 cases stood at 84,349,523.

In the U.S, the total number of cases has risen to 20,614,554, with the total number of related deaths rising to 356,401.

Behind the U.S, India has seen the total number of cases rise to 10,303,409, with Brazil reporting 7,700,578 cases in total.

For France, Germany, Italy, and Spain, the total number of cases stood at 8,461,804, with 224,611 related deaths.

Across the United Kingdom, the total number of cases stood at 2,542,065, with 74,125 related deaths.

Governments expect the numbers to rise following the holidays, however.

What’s next?

Other countries are expected to complete COVID-19 vaccine review processes in the coming weeks.

With France, Germany, Italy, and Spain reporting a combined 8,461,804 total number of cases, more than Brazil, the EMA approvals are key.

Following the EMA’s approval of the BioNTech/Pfizer Inc. vaccine last week, news hit the wires late in the week that the EMA needs more data from AstraZeneca.

In terms of production capacity, price, and logistics, there will certainly be pressure on EMA approval.

From Russia, Sputnik V is also in high demand, with Russia’s vaccine reportedly approved by Argentina. Russia is already delivering the vaccine to countries including Algeria, Bolivia, Guinea, and Serbia.

India and Brazil, however, are reportedly delaying the use of Sputnik V until the completion of more trials.

Concerns over the safety of the Sputnik V vaccine, however, has meant that the West remains reluctant to consider the vaccine.

China’s vaccine has also received a cold reception. Late last week China’s health authorities approved the Sinopharm COVID-19 vaccine for general use. While the West has yet to show interest in the Sinopharm vaccine, the nations within the Middle East have begun to use the Sinopharm vaccine.

In spite of skepticism, successful clinical trials of both China’s and Russia’s vaccines would give governments an ever-widening number of vaccines to choose from.

The good news is that Johnson & Johnson should also be delivering clinical trial data this month.  A 4th vaccine from the West, coupled with China and Russia’s vaccines, would deliver an even wide choice.

Johnson & Johnson currently remains the front runner to deliver the first single-dose vaccine.

The Pandemic Year 2020: Investors Navigating the New Normal with COVID

As we head into the holiday season, investors remain focused on COVID-19 pandemic which has forcefully plunged the world into a “New Normal”. The alarming speed of the spread of the virus across the world has transformed and reshaped the world in a short amount of time but with longer-lasting impact. As everyday life has been impacted, investors have also reassessed and realigned their investment strategies to face the new world.

Stock Market

Quarter 1 – A Trio of Crises & the Great Lockdown

The markets tumbled like dominoes hit by various headwinds at once ranging from geopolitical tensions between the US and China, Hong Kong and Iran, extreme weather conditions, an oil price war, and the novel coronavirus which forced various forms of lockdowns and social distancing across the globe. Faced by an unprecedented health crisis, and an oil crisis, the world was bracing for an unexpected economic crisis.

Volatility soared in the markets to decades high from an average of 20 to a high above 80 around mid-March causing several circuit breakers and trading halts on some stock exchanges. The stock market bottomed down, and major equity indices dropped in bear market territory ending an 11-year bull-run in the stock market. Global stocks experienced the worst week since the global financial markets.

Central banks and governments rushed in to intervene and cushion the freefall in the financial markets and support their economies which brought some degree of calm in the stock market.

Quarter 2 – The Grand Reopening & Roadmap to Recovery in a Pandemic

Investors witnessed the grand reopening in the second quarter after the great lockdown in the first quarter. Massive fiscal stimulus, ultra-low levels of interest rates, central banks interventions and optimism on the reopenings helped the stock market to rebound as fiercely and aggressively as it initially fell.

The government and central banks have absorbed nearly all the shocks of the virus on the financial markets by injecting massive liquidity in the economy, keeping credit flowing and supporting their economy with huge fiscal stimulus plan among many others unconventional plans. On the reassurance that the intervention measures are not going to fizzle out anytime soon, investors have pushed global stocks higher:

  • Major US equity indices rallied and record new highs.
  • European stocks were flaring better. Even though the Eurozone was not economically strong pre-COVID-19 crisis, the better containment of the virus compared to the US and the historic unity European countries have shown during the coronavirus crisis has boosted confidence for European stocks
  • Australian shares also rebounded significantly and reclaimed the 6,000 level to mark the best quarter in over a decade.

Quarter 3 – Vaccine Optimism, Presidential Election, and Tech Rally

While the vaccine updates and the US Presidential elections campaigns were at the forefront of the markets in the third quarter, global stimulus improving economic data, a better-than-expected earnings season and the resilience of the technology sector have lifted risk sentiment. Global equities have been on a staggering rally at the beginning of the quarter allowing the major equity indices to recover the losses made in the first quarter.

However, geopolitical risks – US/China tech war and the ending of the US pact on Hong Kong extradition and reciprocal tax treatment, the US stimulus gridlock, the rising number of coronavirus cases and the uncertainty around the pace of recovery created an environment of caution.

Investors were monitoring closely the interventions by central banks and governments to push stocks higher at the risk of the global economic backdrop and the stimulus-fueled economy. The month of September again lived up to its reputation of being the typical scary month for investors which saw major corrections in the stock market as investors were navigating in a highly uncertain environment.

Once the volatility around the US elections faded, investors were focused on the prospects of another round of national lockdowns and the lack of timely US stimulus support. The tech sector was at the centre of attention as the big tech leaders outshined when the world went into virtual reality mode. The industry biggest players: Amazon, Apple, Facebook, Alphabet, and Microsoft were somewhat well-equipped to rise to the challenges. The resilience and performance of the tech sector year-to-date stood out this year – mega-caps tech companies have tackled the pandemic relatively unscathed by its impact compared to the economic malaise other industries are facing.

  • The Reshuffling of the Dow Jones Industrial Average

Another notable event was the reshuffling of the Dow – Amgen (AMGN), Salesforce.com (CRM) and Honeywell International (HON) were added to the index while Pfizer (PFE), Raytheon Technologies (RTX) and Exxon Mobil (XOM) were removed. The moves were spurred by Apple’s decision to split its stock which will reduce the Information Technology index weight.

Apple made history in August and retakes the market-cap lead from Microsoft to become the first US company to be valued at US$2 trillion.

If immediate attention generally was on the FAANG group, Sea Ltd, the leading internet platform in Southeast Asia and Taiwan drew attention as well. The company outshines Tesla and the FAANG group of companies and emerged as the world’s best performing large-cap stock.

The Last Quarter – First Vaccinations

Amid the election mayhem and a probable contested election, the gridlock in Congress, another wave of hard lockdowns, and Brexit chaos, investors had a breather with promising vaccine updates. The back and forth on the US stimulus coronavirus relief package and Brexit negotiations took the markets on a wild ride in the last quarter. Throughout the last few months, Pfizer and BioNTech, Moderna and AstraZeneca issued convincing statements of the progress of the vaccine trials.

The emergency vaccine approvals and the first vaccinations across major countries like the US and the UK brought some relief following the ongoing surge in coronavirus cases in certain economies. Overall, there was enough optimism in the last few weeks for global equities to recover from October’s plunge.

Source: Bloomberg

US Share Market

Despite a contested election, the lack of timely fiscal support and the raging spread on the virus in the US, the share market was supported by the vaccine updates and first immunizations which took place earlier this month.

Source: Bloomberg

Similarly, the encouraging vaccine news was the bullish trigger for the European markets despite the further lockdowns in major European countries, tough Brexit negotiations and a slower economic recovery compared to its peers. As of writing, a new variant of the virus in the UK triggered a sell-off in the European markets. The CBOE Volatility Index jumped to the highest in a month above the 30 mark.

The new COVID mutation was mainly detected in the UK but the WHO confirmed its presence so far in Denmark, the Netherlands and Australia as well. Investors are closely monitoring statements on whether the new variant is more easily transmissible than the original strain of the disease.

The Australian Share Market – Back in Black

After the release of the Federal Budget, Australian shares started to decouple from US and European stocks as investors endorsed the government blitz which boosted confidence. During the month of November, the Australian share market has rallied significantly on the back of:

  • The easing of lockdown restrictions in the second most populated state and the second’s largest city in the country.
  • The positive vaccine updates coming from Pfizer and BioNTech, Moderna and AstraZeneca.
  • The confidence in the Australian economy as compared to other major countries. Consumer confidence reached a 10-year high.
  • Historically low-interest rates. Even though the RBA slashed interest rates to a historic low, there is a level of reassurance that the lower level of interest rates will stay for a longer period which means that the central bank is not expecting a deterioration in the Australian economy fuelling investors’ confidence.
  • The Asia-Pacific Free Trade Agreement has provided another level of confidence at a time of global trade uncertainty. It has also elevated expectations that both countries might initiate some sort of dialogue after the Chinese Communist Party has frozen all communications with Australian ministers.

In November, the ASX recorded their best month in decades and briefly erased its 2020 losses before retreating lower. As of writing, the index is currently trading at around 6,601.

Forex Market: The King Dollar?

The US dollar went on a roller coaster ride throughout the year. In a classic reaction to an unpredictable and uncertain event like the pandemic, the demand for haven assets triggered a rally in the US dollar. As panic gripped markets, dollar funding pressures drove the US dollar index to a 3-year high above the 102 level. Even though policymakers stepped in to enhance flows, the greenback remained in elevated levels.

Source: Bloomberg

A significantly bigger stimulus package compared to its peers at the beginning fuelled hopes that the US economy would probably recover faster than other major economies. The US dollar was unable to maintain the bullish momentum over the following quarters as risk sentiment improved and the US was still battling hard the spread of the virus with no signs of slowing down and stimulus packages were not flowing in as required.

Major currencies remained stronger than the US dollar in the following quarters. Major central banks like the RBA had to tap into QE for the first time this year and many even contemplate or left the door open for negative interest rates if warranted.

Source: Bloomberg

The Euro gathered strength on the historic unity, some economic recovery, the ECB stimulus program and EU budget. The renewed lockdowns and Brexit woes remain the factors that may drove further volatility in the EUR pairs. The EURUSD pair is trading at a high above the 1.22 level.

The Antipodean currencies were among the top gainers lifted by the additional funding from the central banks, governments, renewed confidence, economic data and the better containment of the virus as compared to other major economies. The AUDUSD pair is trading nearly three-year high around the 0.750 level.

Source: Bloomberg

As the Brexit deadline looms, the Pound swung between gains and losses driven by contradictory headlines and statements from both the EU and the UK. Traders grew more hopeful in the last few days when both parties appear committed to seeing a deal through despite significant differences on three critical issues: level playing fieldgovernance and fisheries. Investors were taken on a roller-coaster ride following intensifying deal negotiations and on-and-off positive and negative announcements.

Brexit hopes drove the GBPUSD pair to an intraday high of 1.3624 last week. The Pound plummeted on the news of a new variant of the virus and as of writing, the pair retreating lower to the 1.33 level.

Gold Rally

At the start of the year, the US dollar and Gold were moving in tandem due to the prevailing uncertainties – QE, low-interest rates, trade frictions, geopolitical tensions, global debt and growth uncertainties, gold hoarding by central banks have driven the gold price higher just below the $1,700 mark.

However, Gold was initially liquidated due to the wider and rapid spread of the coronavirus across the globe. The precious metal is viewed as a highly liquid asset and investors were in a need of cash due to margin calls and other liquidity requirements. COVID-19-induced liquidity issues caused the yellow metal to plunge to a low of $1,451.55.

The yellow metal rallied at the start of the third quarter to a high of $2,075 in the month of July but traded within a narrow range as investors digested some positive vaccines updates, improving economic data and easing lockdown restrictions. The XAUUSD pair plunged below a key psychological level below the $1,900 mark but held on to elevated levels.

From the health crisis point of view, the vaccine updates are fuelling the hopes of a quicker recovery and providing reassurance to investors. However, the amount of stimulus injected into the global economy over the last couple of months is evidence that the economic and financial recovery might take some time. Gold is still trading at a decade-high around the $1,880 mark.

Oil Market

An oil price war and the ongoing pandemic struck the crude oil market at a time where the industry was already faced with a simultaneous demand and supply shock. As the world grapples with the ongoing pandemic, different forms of lockdowns across the globe have severely impacted key industries of consumers of oil. Global activities have slowed down on a massive scale with empty roads, grounded aircraft, plunging car sales and disrupted supply chains abruptly sapping oil demand.

The extent of the disruptions in the energy market caused by the pandemic will probably leave a lasting impact on the oil market which may take years to overcome. Traders are analysing whether the impact of the pandemic will either accelerate the pace in using renewables or delay that process.

Crude oil prices have mostly remained stuck within a range below the $50 after the big plunge earlier this year. With a dire demand outlook from as per the October reports, there are increasing pressure from OPEC members and its allies to balance the supply side and avoid flooding the oil market with extra supply.

In a pandemic-induced environment, investors are navigating a new normal with COVID-19. Despite the painful year on the health front, the stock market had a great year driven by the prompt interventions in the financial markets by central banks and governments around the globe.

While a vaccine provided a sense of relief, we are ending the year with much uncertainty on the geopolitical, economical and health front.

By Deepta Bolaky

Disclaimer: The articles are from GO Markets analysts, based on their independent analysis or personal experiences. Views or opinions or trading styles expressed are of their own; should not be taken as either representative of or shared by GO Markets. Advice (if any), are of a ‘general’ nature and not based on your personal objectives, financial situation or needs. You should therefore consider how appropriate the advice (if any) is to your objectives, financial situation and needs, before acting on the advice. If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.

About GO Markets

GO Markets was established in Australia in 2006 as a provider of online CFD trading services. For over a decade we have positioned ourselves as a firmly trusted and leading global regulated CFD provider. Traders can access more than 250 tradeable CFD instruments including Forex, Shares, Indices and Commodities.

Follow us and keep up to date with the latest market news and analysis.

With Dovish Powell, Can Gold Shine Again?

Fed Chair Jerome Powell sounded dovish during his press conference on December 16, where he gave a market update after the Fed’s monetary policy meeting. The Fed will remain accommodative for a long time, which should support gold prices.

Last week was full of important events. First, both the Pfizer/BioNTech and Moderna vaccines received emergency-use authorization from the U.S. Food and Drug Administration . In consequence, the first COVID-19 vaccination in the United States has already taken place, which is great news for America, as it marks the beginning of the end of the pandemic .

It’s high time for that! As the chart below shows, the U.S. has already lost about 314,000 people to the coronavirus.

And what is disturbing, the current wave of infections doesn’t look like it’s going to end quickly. As one can see in the chart below, the number of new daily official cases is still above 200,000 – actually, it has recently jumped to about 250,000.

So, the beginning of vaccine distribution is the light at the end of the pandemic tunnel that brings hope for a return to normalcy in 2021. It’s important to note that, contrary to the groundbreaking November news about the efficacy of the vaccines, the approval of vaccines and first injections didn’t plunge gold prices. This suggests that the bridge to normalcy built by the vaccines has already been priced in. That’s good news for the gold bulls .

Second, there was renewed optimism about the fresh fiscal support . Indeed, there are higher odds now than at least about $750 billion in aid will be passed and implemented by the end of 2020. Theoretically, the fiscal stimulus is considered to be helpful for the economy, so it should be negative for gold, however, the price of the yellow metal may actually go up amid concerns about rising fiscal deficits , public debt , and inflation .

Powell’s Press Conference and Gold

Third, the last FOMC meeting took place this year. I’ve already analyzed it in last Thursday’s (Dec. 17) edition of the Fundamental Gold Report , but then I focused on the monetary policy statement and the fresh dot-plot . As a reminder, the Fed tied tapering in its quantitative easing to the progress toward reaching full employment and inflation at two percent, while the economic projections were more optimistic, but they nevertheless didn’t see any interest rate hikes until the end of 2023.

However, it was Powell’s press conference that was really crucial, so let’s take a closer look at it. The Fed Chair sounded dovish, as he emphasized the U.S. central bank’s commitment to maintaining its very accommodative stance. In particular, Powell reiterated that the Fed will not hike interest rates or reduce its asset purchase program anytime soon. Actually, Powell said that the bank will normalize its monetary policy only after reaching the maximum employment and price stability:

“our guidance for both interest rates and asset purchases will keep monetary policy accommodative until our maximum employment and price stability goals are achieved. And that’s a powerful message. So substantial further progress means what it says. It means we’ll be looking for employment to be substantially closer to assessments of its maximum level, and inflation to be substantially closer to our 2 percent longer run goal, before we start making adjustments to our purchases.”

In other words, Powell clearly stated that he will keep his foot on the gas until at least 2023, and that he won’t pull the brakes even if inflation increases. This is because Powell believes that although inflation may rebound in 2021, it will be a temporary increase, and the Fed now has a flexible average inflation targeting framework, so it wants inflation to overshoot the target:

“What we’re saying is we’re going to keep policy highly accommodative until the expansion is well down the tracks. And we’re not going to preemptively raise rates until we see inflation actually reaching 2 percent and being on track to exceed 2 percent. That’s a very strong commitment. And we think that’s the right place to be”

This means that in 2021 the Fed is likely to be behind the curve. Higher inflation with the nominal interest rates unchanged imply lower real interest rates – further declines in these rates should push the gold prices up . Moreover, Powell will announce in advance when he wants to take his foot off the gas pedal and start reducing the amount of monetary accommodation. The Fed clearly doesn’t want the replay of the 2013 taper tantrum :

“And when we see ourselves on a path to achieve that goal, then we will say so undoubtedly well in advance of any time when we would actually consider gradually tapering the pace of purchases.”

Implications for Gold

What does it all mean for gold prices? Well, although the Fed did not expand its monetary accommodation in December, Powell was really dovish and he pointed out that the U.S. central bank would continue its current easy stance “as long as it takes until the job is well and truly done.” Gold welcomed Powell’s remarks and gained nearly $40 on Thursday, as the chart below shows.

It makes sense – after all, the Fed promised that its monetary policy would remain highly accommodative for a long time. So, although the potential for further accommodation and, thus, a great rally in gold prices is limited (at least until we see a further weakening in the US dollar or an increases in inflation and decrease in the real interest rates), the risk of a sudden tightening in the Fed’s monetary policy , that could plunge the gold prices, has diminished. Therefore, gold could shine again – at least until the markets start to worry about the normalization of monetary policy and start to forecast increases in the interest rates.

If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

Stocks Fall but Close Week Positive

Quick Update

Dear readers, before we get into today’s news and stock analysis and because I’ve been receiving many questions from you, I’d like to first clarify what I mean by BUY, SELL, or HOLD. Here, I am largely referring to outperforming the S&P 500. When the conditions favor adding risk and buying the U.S. market overall, I will be issuing an “alert.” I am not sure yet whether I will be moving to entry prices or target prices & stop losses.

In the current market environment, when fundamentals have essentially fallen to the wayside, I prefer to invest directionally rather than being married to certain levels in the market. In my view, trading with specific figures in mind can hurt long term returns if you do not let your winners run and cut your losers fast. I do update my calls daily, though, and any changes will be highlighted! Thank you again for being such great readers – I truly value your trust. Stay tuned for updates and let me know if you have any other questions!

Let’s begin Monday by reviewing what happened at the close of last week.

Volatile trading occurred on Friday (Dec. 18), with Congress struggling to close out a stimulus package, causing stocks to slip from record highs.

News Recap

  • The Dow Jones fell 124.32 points, or 0.4%, to 30,179.05. At its session low, the index fell more than 270 points. The S&P 500 also dipped 0.4% and snapped a three-day winning streak. The Nasdaq fell only 0.1%, while the small-cap Russell 2000 fell 0.41%.
  • While Congress claims to be on the brink of a $900 billion stimulus deal , it is working against time. In public, leaders are speaking optimistically that a deal will pass, however, there are last-minute partisan disputes on direct payments, small business loans, and a boost to unemployment insurance
  • There was an unusually large amount of trading volume on Friday (Dec. 18) as Tesla (TSLA) was set to officially join the S&P 500 after the closing bell. Tesla is being added to the index in one fell swoop, marking the largest rebalancing of the S&P 500 in history. After surging 700% in 2020, from day 1, Tesla will be the seventh-largest company in the S&P in terms of market cap.
  • The FDA officially approved Moderna’s vaccine for emergency use. Government officials plan to ship nearly 6 million doses of Moderna’s vaccine in addition to the 2.9 million Pfizer (PFE) doses already in distribution.
  • Despite Friday’s (Dec. 18) losses, the indices closed out the week with mild gains. The Dow closed up 0.4%, the S&P 500 advanced 1.3%, and the NASDAQ closed up 3.1%. The small-cap Russell 2000 continued its strong run as well and gained 2.5% for the week.
  • Meanwhile, the pandemic has reached its darkest days and is hitting unforeseen and unprecedented numbers . The U.S. shattered the previous record of daily deals on Wednesday (Dec. 16), recording over 3,600 deaths. As of Friday (Dec. 18), the country has also now surpassed 17 million confirmed cases, with death totals soaring past 300,000. California, Illinois, Pennsylvania, and Texas alone reported more than 1,000 deaths in the past week.

While the general focus between both investors and analysts appears to be on the long-term potential in 2021, there are certainly short-term concerns. Inevitably, there will be a short-term tug of war between good news and bad news. For now, though, the main catalyst is the stimulus package. If a stimulus package is passed before Christmas, the markets could benefit. If it doesn’t, markets will drop. Time is running short and we may be at a fork in the road.

According to Luke Tilley , chief economist at Wilmington Trust, another stimulus package was needed to keep the economic recovery from stalling before the mass distribution of a vaccine.

“With the continued rising cases and mass vaccinations still a ways out, we could see some further weakness in jobs and even a flattening where we’re not even adding jobs at all … that’s absolutely a possibility for this next jobs report,” Tilley said. “And if we were to not get another stimulus package, you’re going to have 10 to 11 million people fall off the unemployment rolls right away, and that would hit spending as well.”

However, despite near-term risks, the overwhelming majority of market strategists are bullish on equities for 2021, especially for the second half of the year. While there may be some short-term worries, the consensus between market strategists is to look past the short-term pain and focus on the longer-term gains. Although the economic recovery could stutter in the early half of the year, the general focus is on the second half of the year when we could potentially return to normal. Many analysts expect double-digit gains to continue in 2021, with strategists in a CNBC survey expecting an average 9.5% rise in 2021 for the S&P 500.

Additionally, according to Robert Dye, Comerica Bank Chief Economist :

“I am pretty bullish on the second half of next year, but the trouble is we have to get there…As we all know, we’re facing a lot of near-term risks. But I think when we get into the second half of next year, we get the vaccine behind us, we’ve got a lot of consumer optimism, business optimism coming up and a huge amount of pent-up demand to spend out with very low interest rates.”

In the short-term, there will be some optimistic and pessimistic days. On some days, the broader “pandemic” market trend will happen, with cyclical and recovery stocks lagging, and tech and “stay-at-home” stocks leading. Sometimes a broad sell-off based on fear or overheating may occur as well. On other days, there will be a broad market rally due to optimism and 2021-related euphoria. Additionally, there will be days (and in my opinion this will be most trading days), when markets will trade largely mixed, sideways, and reflect uncertainty. But if we get an early Christmas present and a stimulus package passes, all bets are off. It could mean very good things for short-term market gains.

Despite the optimistic potential, the road towards normalcy will hit inevitable speed bumps. While it is truly hard to say with conviction that a short-term rally or bear market will come, I do believe that some consolidation and a correction could be possible in the short-term on the way towards another strong rally in the second half of 2021.

Outside of economic damages and an out-of-control virus, the market itself is flashing potential signs of over-optimism and euphoria. In its most recent survey, for example, the American Association of Individual Investors (AAII) found that 48.1% of investors identified as being bullish – well above the historical average of 38%. With an overabundance of cocky, euphoric, and optimistic investors, the market becomes more vulnerable to selling pressure. Corrections are very common though. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017). Because there has not been one since the lows of March, we could be due for one in the early part of 2021.

Therefore, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction in early 2021 is very possible, but I do not believe, with certainty, that a correction above ~20% leading to a bear market will happen.

Has the Nasdaq Officially Overheated?

Don’t ever let anyone tell you “this time is different” if fears of the dot-com bubble are discussed. History repeats itself, especially in markets. I have many concerns about tech valuations and their astoundingly inflated levels. The recent IPOs of DoorDash (DASH) and AirBnB (ABNB) reflect this. I believe that more pullbacks along the lines of Wednesday, December 9th’s session could inevitably come in the short-term.

Pay close attention to the RSI. While an overbought RSI does not automatically mean a trend reversal, I called keeping a very close eye on this for the Nasdaq. The December 9th Nasdaq pullback, after it exceeded a 70 RSI, reflects that.

The RSI is now above 70. Monitor this . With unstable volume to start the week on the horizon, as Tesla officially joins the S&P 500, I am calling for some short-term volatility. I did not make a conviction call last week but I am not making that mistake again. Because the RSI is officially above 70, and because I foresee unstable volume thanks to Tesla, take profits and SELL some shares, but do not fully exit .

While tech has overheated, there is still some very real long-term optimism based on stimulus hopes and 2021’s potential.

Furthermore, on pessimistic days, having Nasdaq exposure is crucial because of the “stay-at-home” trade.

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

COVID-19 Update – Moderna Inc. EUA Approved as a New Strain Surfaces in the UK

The Latest

Following last Thursday’s review by FDA advisors, the FDA issued Moderna Inc. with a EUA for distribution and use across the U.S.

The EUA allows the vaccination of 18-year-olds and older with Moderna Inc.’s mRNA vaccine.

Late last week, the U.S government and the markets had anticipated the EUA approval. 20 million doses are due for the U.S before the end of the year.

As new COVID-19 cases continue to surge across the U.S, Operation Warp Speed will need to prove decisive in the fight against the pandemic.

What’s next?

Following the FDA approval, Moderna Inc. expects to deliver doses of the vaccine to healthcare centers from Monday.

A reported 3,700 sites are to begin vaccinations at the start of the week. The number of doses is expected to be far higher than those that Pfizer Inc. is in the process of circulating.

This is assuming that there are no supply chain issues that could undermine the production of 20 million doses by year-end. Over the weekend, there were reports that certain states had seen their allocation of the Moderna Inc. vaccine cut significantly…

Over the weekend, Moderna Inc. began to deliver vaccine doses under guard and in secure refrigeration.

Later today, the CDC is also set to decide on the next priority group beyond phase 1c to receive the COVID-19 vaccine.

The CDC’s phase sequence for the highest priority recipients of COVID-19 vaccines was as follows:

Phase 1a: Healthcare personnel and long-term care facility residents.

Phase 1b: Essential workers including the education sector, food & agriculture, utilities, police, firefighters, correction officers, transportation.

Phase 1c: Adults with high-risk medical conditions and adults of the age of 65 years plus.

In terms of numbers, healthcare personnel and long-term care facility residents total around 24 million. This would require a total of 48 million doses for phase 1a alone.

This means that, while the CDC will decide on priority groups beyond phase 1c, new groups will need to wait well into the New Year based on vaccine delivery numbers.

The Latest COVID-19 Numbers

At the time of writing, the total number of confirmed COVID-19 cases stood at 76,728,477. The total number of U.S cases has risen to 18,078,925, with the total number of U.S related deaths rising to 323,404.

Things also remain dire in other parts of the world, with new cases continue to spike in the winter months.

Of greater concern, however, will be news of a new coronavirus strain in the UK.

Over the weekend, news hit the wires of a new and more virulent strain of the virus. While more contagious, however, experts don’t consider the new strain to be more fatal at present.

Australia, Denmark, the Netherlands, and the UK have reported the mutation. While of concern, there is also no evidence that the new strain is resilient to the newly approved COVID-19 vaccines.

In the days ahead, the key will be for the WHO and the UK to continue to confirm the effectiveness of the COVID-19 vaccines against the new strain. Any resilience to the recently approved vaccines and the COVID-19 pandemic could cause global panic and another shutdown of borders.

Stocks Surge to New Records on More Optimism

Major averages hit both all-time intraday and closing highs on Thursday (Dec. 17), riding on vaccine optimism and hopes that a stimulus package could be passed in a matter of days.

News Recap

  • The Dow Jones climbed 148.83 points, or 0.5%, to 30,303.37 for a record close. Both the S&P 500 and Nasdaq hit intraday and closing records as well and gained 0.6% and 0.8%, respectively. In typical fashion, the Russell 2000 small-cap index once again beat the other indices and gained 1.30%.
  • Senate Majority Leader Mitch McConnell on Thursday (Dec. 17) said that a stimulus deal was closing in. Congress appears to be nearing a $900 million stimulus package that would include direct payments to individuals. However, the package would exclude the partisan issues of liability protections for businesses and aid to state and local governments.
  • Despite the optimistic tone of the day, jobless claims disappointed for a second consecutive week. Jobless claims totaled 885,000 last week, hitting their highest levels since early September. This was also significantly worse than the expected 808,000.
  • An FDA panel officially endorsed Moderna’s (MRNA) COVID-19 vaccine. It could officially be cleared for emergency usage as early as Friday (Dec. 18), and be distributed as soon as after the weekend. Upon authorization, government officials plan to ship nearly 6 million doses of Moderna’s vaccine in addition to the 2.9 million Pfizer (PFE) doses already in distribution.
  • Real estate, materials and health care were the best-performing sectors in the S&P 500, each gaining over 1%. Johnson & Johnson (JNJ) rose 2.6% to lead the Dow higher.
  • Tesla (TSLA) gained 5.32% and will now officially join the S&P 500.
  • We are in the darkest days of the pandemic. On average, the U.S. is recording at least 215,729 additional COVID-19 cases a day . More than 114,200 Americans are also now hospitalized , and over 3,400 new deaths were recorded. According to the CDC Director, Robert Redfield, US COVID-19 deaths are likely to exceed the 9/11 death toll for the next 60 days.

While sentiment has been positive over the last two trading sessions, there will still be a short-term tug of war between good news and bad news. It’s quite simple really – until a stimulus is passed and the virus is somewhat brought under control, there will be negative pressure on the markets. Even though a stimulus package passing appears to be imminent, time is running short and we may be at a fork in the road.

For now, though, hopes that a deal could pass through are sending stocks higher.

“Stimulus is still the main driver in the market right now until they get something done, and it does appear there is some motivation on that front to get something done,” said Dan Deming, managing director at KKM Financial, further stating that “the market’s benefiting from that (enthusiasm).”

Additionally, Luke Tilley , chief economist at Wilmington Trust, said that another stimulus package was needed to keep the economic recovery from stalling before the mass distribution of a vaccine.

“With the continued rising cases and mass vaccinations still a ways out, we could see some further weakness in jobs and even a flattening where we’re not even adding jobs at all … that’s absolutely a possibility for this next jobs report,” Tilley said. “And if we were to not get another stimulus package, you’re going to have 10 to 11 million people fall off the unemployment rolls right away, and that would hit spending as well.”

The overwhelming majority of market strategists are bullish on equities for 2021 though, despite near-term risks. While there may be some semblance of a “Santa Claus Rally” occurring, the general consensus between market strategists is to look past the short-term pain and focus on the longer-term gains. The mid-term and long-term optimism is very real.

According to Robert Dye, Comerica Bank Chief Economist :

“I am pretty bullish on the second half of next year, but the trouble is we have to get there…As we all know, we’re facing a lot of near-term risks. But I think when we get into the second half of next year, we get the vaccine behind us, we’ve got a lot of consumer optimism, business optimism coming up and a huge amount of pent-up demand to spend out with very low interest rates.”

In the short-term, there will be some optimistic and pessimistic days. On some days, the broader “pandemic” market trend will happen, with cyclical and recovery stocks lagging, and tech and “stay-at-home” stocks leading. Sometimes a broad sell-off based on fear or overheating may occur as well. On other days, there will be a broad market rally due to optimism and 2021-related euphoria. Additionally, there will be days (and in my opinion this will be most trading days), when markets will trade largely mixed, sideways, and reflect uncertainty. But if we get an early Christmas present and a stimulus package passes, all bets are off. It could mean very good things for short-term market gains.

In the mid-term and long-term, there is certainly a light at the end of the tunnel. Once this pandemic is finally brought under control and vaccines are mass deployed, volatility will stabilize, and optimism and relief will permeate the markets. Stocks especially dependent on a rapid recovery and reopening, such as small-caps, should thrive.

Due to this tug of war between sentiments though, it is truly hard to say with any degree of certainty that a correction will happen or more record high rallies will occur.

Therefore, to sum it up:

While there is long-term optimism, there is short-term pessimism. A short-term correction is very possible, but it is hard to say with conviction that a big correction will happen.

The premium analysis this morning will showcase a “Drivers and Divers” section that will break down some sectors that are in and out of favor. As a token of my appreciation for your patronage, I decided to give you a free sample of a “driver” and “diver” sector. Please do me a favor and let me know what you think of this segment! I’m always happy to hear from you.

Driving

Small-Caps (IWM)

In typical fashion, the Russell 2000 small-cap index once again beat the other indices and gained 1.30% on Thursday (Dec. 17). I truly love small-cap stocks in the long-term and this small-cap rally is more encouraging than the “stay-at-home” stock rallies from April/May. This is a bullish sign for a long-term economic recovery and shows that investors are optimistic that a vaccine will return life to relatively normalcy in 2021.

I do have some concerns of overheating in the short-term however, especially with the headwinds that still exist. The Russell keeps outperforming no matter what the market sentiment of the day or week is. For example, although the week ended December 11th was an overall down week, the Russell 2000 STILL managed to outperform the larger indices and eek out another weekly gain of 1.02%. While it is remarkable, I do not see how this is sustainable in the short-term.

The performance of the Russell 2000 index since early November has been nothing short of staggering. Although the Russell index is composed mostly of small-cap value cyclical stocks dependent on the recovery of the broader economy, and may be more adversely affected on “sell-the-news” kind of days, its hot streak since November has not cooled off in the slightest.

Since the start of November, the Russell 2000 has skyrocketed and considerably outperformed the other major indices. The iShares Russell 2000 ETF (IWM), in comparison to the ETFs tracking the Dow (DIA), S&P (SPY), and Nasdaq (QQQ), has risen 28.62%. This is at least 13% higher than all of the other major indices. Since the start of December, the Russell ETF has also outperformed the other ETFs between 4%-5%.

However, when looking at the chart for the Russell 2000 ETF (IWM) , it becomes pretty evident that small-cap stocks have overheated in the short-term. These are stocks that will experience more short-term volatility. Stocks don’t always go up but the Russell’s trajectory since November has been essentially vertical. The IWM ETF keeps hitting record highs while the RSI keeps overinflating way past overbought levels. I would SELL and trim profits for the short-term but do not fully exit these positions. A stimulus could be imminent and send these stocks soaring more. But if there is a pullback, BUY for the long-term recovery.

Diving

US Dollar ($USD)

The U.S. Dollar’s plunge continues to its lowest levels in years. I called the return to oversold levels this week despite the currency piercing the 91-level last Wednesday (Dec. 9). I knew it was “fool’s gold” and not the sign of any sort of breakout. I have been calling the dollar’s weakness for weeks despite its low levels, and I expect the decline to continue.

For the first time since April 2018, the world’s reserve currency is now trading below 90.

Why did the dollar plunge so much on Thursday (Dec. 17)? You can thank the Fed! After the Federal Reserve’s dovish tone and reassurance on Wednesday (Dec. 16) that it won’t be soon tapering its bond purchases, bearish traders took this as a sign to continue selling the dollar.

“The latest blow to the dollar came from the Fed, which vowed not to touch policy even if the outlook for the U.S. economy brightens as it now expects,” said Joe Manimbo , senior analyst at Western Union Business Solutions.

After hitting a nearly 3-year high in March, the dollar has plunged in excess of 13%.

Meanwhile, other currencies continued strengthening on Thursday (Dec. 17), relative to the dollar:

  • The euro rose 0.6% to $1.2270, hitting its highest level versus the dollar since April 2018. The euro is up more than 9% year to date.
  • The dollar fell to a more-than-three-year low versus the Japanese yen and declined 0.4% to ¥103.07.
  • The British pound was up 0.5% at $1.3575 – its highest since April 2018.
  • Both the Australian dollar and the New Zealand dollar each gained 0.6% versus the US dollar.
  • The US dollar was off 0.1% vs. the Canadian dollar.

After briefly rising above an oversold RSI of 30 last week, the dollar’s RSI is at an alarmingly low 22.96. The dollar is also significantly trading below both its 50-day and 200-day moving averages.

Many believe that the dollar could fall further too.

If the world returns to relative normalcy within the next year, investors may be more “risk-on” and less “risk-off,” meaning that the dollar’s value will decline further.

Additionally, because of all of the economic stimulus and seemingly imminent additional stimulus, the dollar’s value has declined and could have more room to fall. With a dovish Fed and record low-interest rates projected to remain this low for at least another two years, the dollar may not appreciate again for a very long time.

While the dollar may have more room to fall, this MAY be a good opportunity to buy the world’s reserve currency at a discount – at least for a quick short-term trade. The low RSI reflects this.

But I just have too many doubts on the effect of interest rates this low, government stimulus, strengthening of emerging markets, and inflation to be remotely bullish on the dollar’s prospects over the next 1-3 years.

For now, where possible, HEDGE OR SELL USD exposure.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

COVID-19 Vaccine Update – Moderna Inc. Vaccine on the Brink of FDA Approval

The Latest

On Thursday, U.S FDA advisors voted in favor of Moderna Inc.’s COVID-19 mRNA vaccine.

A 20 versus 0 votes, with one abstention, was even more conclusive than the 17 versus 4 votes in favor of the BioNTech/Pfizer Inc. vaccine.

Some concerns over the administering of the Pfizer Inc. vaccine to 16-18-year-olds had led to the 4 votes against.

By contrast, the Moderna Inc. vaccine is for ages of 18 years and over, reducing concerns over the side effects of the vaccine on younger age groups.

In response to the review, the FDA announced that it expects to approve Moderna Inc.’s EUA by later today.

What’s next?

Once the FDA approves the EUA, Moderna Inc. expects to deliver 20 million doses to the U.S by the end of the month. That’s enough to vaccinate 10 million in the U.S. An additional 80 million are then due for delivery by the 1st quarter and an additional 100 million in the 2nd quarter.

Based on the CDC’s prioritizations, the first batch would cover a large proportion of phase 1a recipients.

With the number of new COVID-19 cases continuing to rise alongside death tolls, there will be a sense of urgency.

In contrast to the Pfizer Inc. vaccine, the transportation and distribution of the Moderna Inc. vaccine are far less onerous.

The vaccine can be reportedly transported in a liquid state at standard refrigerated temperatures. This will mean that Moderna Inc. will likely be delivered to key areas much more quickly over the next week.

Moderna Inc. will need to avoid supply chain and production capacity issues to deliver the 20 million doses.

The Latest COVID-19 Numbers

At the time of writing, the total number of confirmed COVID-19 cases stood at 75,283,501. The total number of U.S cases has risen to 17,627,030, with the total number of related deaths rising to 317,929.

Things also remain dire in other parts of the world, with new cases continue to spike in the winter months.

Moderna Inc.’s vaccine comes at a desperate time. More will vaccine approvals will be needed, however, to curb the spread of the virus.

Nasdaq Hits Yet Another Record Close

The major indices closed mixed on Wednesday (Dec. 16), as the Nasdaq hit yet another record close amidst stimulus optimism and the Fed’s dovish tone.

News Recap

  • Although the Dow Jones closed lower by 44.77 points, or 0.15%, the S&P 500 gained for the second day in a row and rose by 0.18%. The Nasdaq closed once again at a record high and gained 0.5%.
  • Sentiment for the day started negatively after the Commerce Department reported a steeper-than-expected drop in U.S. retail sales. The department stated that retail sales fell by 1.1% in November compared to estimates of 0.3%.
  • Cautious optimism that some sort of stimulus could be passed before the end of the year encouraged investors.
  • According to Politico , Congress was on the brink of a $900 billion stimulus deal that would include a new round of direct payments to consumers. However, that package would exclude the more contentious areas of liability shields for businesses and state and local aid.
  • We have reached the deadliest weeks of the COVID-19 pandemic. More than 300,000 total COVID-19 related deaths have now been confirmed in the U.S., with over 16 million confirmed cases. Additionally, US officials reported 3,400 new COVID-19 deaths – a daily record.
  • After an FDA panel officially endorsed Moderna (MRNA) – following a review which confirmed safety and efficacy earlier in the week – the big day is finally here. On Thursday (Dec. 17), the FDA will officially vote on Moderna’s vaccine. This will strongly complement the mass deployment of Pfizer (PFE) and BioNTech’s (BNTX) vaccine.
  • The Federal Reserve ’s announcement on monetary policy was largely as dovish as expected. The Fed vowed to continue its asset purchase program at the current rate, “until substantial further progress has been made toward the committee’s maximum employment and price stability goals.”
  • Microsoft (MSFT) and Salesforce (CRM) led the Dow with gains of 2.4% and 1.6%, respectively, while Walgreens (WBA) was the laggard and declined 2.15%.
  • Moderna (MRNA), despite its big week ahead, dropped 6.9%.

While there is some short-term uncertainty and mixed sentiment, there is some general consensus: While the short-term may see some pain and/or mixed sentiment, it may be worth it for the medium-term and long-term optimism.

The overwhelming majority of market strategists are bullish on equities for 2021- despite near-term risks. Outside of the pandemic raging to out of control levels, another near-term risk that has been largely overlooked is the Senate runoff election in Georgia. Investors have largely already priced in a divided government – however, if Republicans end up losing both seats in Georgia, this could potentially upend everything.

According to Jimmy Lee, CEO of the Wealth Consulting Group ,

“I think that we can get a little bit of consolidation before year-end just due to normal selling at the year-end for rebalancing or tax loss harvesting. Also, depending on where the pulse is for the Senate race in Georgia, investors might want to get ahead of that if they think that capital gains taxes may go up in the future…So that could cause some additional selling before year-end and we could get a little bit of a pullback. But I am very bullish on equities at this point. And I do think we may get a little bit more of a rotation into the economy-opening sectors.”

Meanwhile, progress on the stimulus package appears to be more optimistic than many expected in the near-term.

“The odds of a fiscal deal before year’s end have been improving,” Goldman Sachs economists led by Jan Hatzius wrote in a note Tuesday (Dec. 15). “While we had expected a smaller package to pass now with a larger package waiting until early 2021, it appears increasingly likely that most of this could pass this week.”

While markets for the rest of 2020 (and perhaps early 2021), will wrestle with the negative reality on the ground and optimism for an economic rebound, the general consensus appears to be looking past the short-term painful realities, and focusing more on the longer-term – a world where COVID-19 is expected to be a thing of the past and we are back to normal.

In the short-term, there will be some optimistic and pessimistic days. On other days, such as Wednesday (Dec. 16) (and in my opinion this will be most trading days), markets will trade largely mixed, sideways, and reflect uncertainty. Therefore, it is truly hard to say with conviction what will happen with markets in the next 1-3 months. However, if a stimulus deal passes within the next week, it could mean very good things for short-term market gains.

In the mid-term and long-term, there is certainly a light at the end of the tunnel. Once this pandemic is finally brought under control and vaccines are mass deployed to the general public, volatility will stabilize, and optimism and relief will permeate the markets. Stocks especially dependent on a rapid recovery and reopening such as small-caps should thrive.

Due to this tug of war between sentiments, it is truly hard to say with any degree of certainty whether another crash or bear market will come.

Therefore, to sum it up:

While there is long-term optimism, there is short-term pessimism. A short-term correction is very possible. But it is hard to say with conviction that a big correction will happen.

Nasdaq Hits Another Record Close – Too Good to Be True?

Is the Nasdaq’s performance since its sharp sell-off last Wednesday (Dec. 9) too good to be true? Truthfully, I don’t know. But it’s very possible – especially if shut down measurements become harsher and stricter and investors return to the “stay-at-home” trade that led markets from April through the end of October.

Additionally, I still have many concerns about tech valuations and their astoundingly inflated levels. Last week’s IPOs of DoorDash (DASH) and AirBnB (ABNB) reflect this and invoke traumatic memories of the dotcom bubble era. I believe that more pullbacks along the lines of last Wednesday (Dec. 9) could inevitably come in the short-term. Frankly, it would make me feel far more confident about initiating tech positions as well for the long-term.

Pay close attention to the RSI. While an overbought RSI does not automatically mean a trend reversal, I called keeping a very close eye on this for the Nasdaq. Last Wednesday’s (Dec. 9th) Nasdaq pullback after it exceeded a 70 RSI reflects that.

The Nasdaq has sharply rallied in the week since then. But its RSI is nearly 69. Monitor this . If the index goes on another bull-run and hits more record closes, it could surely exceed an RSI of 70 by the end of market close on Thursday (Dec. 17). I did not make a conviction call last week but I will now- if the RSI exceeds 70 this time, take profits- but don’t fully exit .

One thing I do like is how stable the volume has been this week and since the sharp sell-off last week. Stable volume is a good thing, especially if one is concerned about volatility. Low volume, especially a declining trend, means that there are fewer shares trading. Lower volume also means less liquidity across the index, and an increase in stock price volatility.

On pessimistic days, having NASDAQ exposure is crucial because of all the “stay-at-home” trade. However, positive vaccine-related news always induces the risk of downward pressure on tech names – both on and off the NASDAQ. What concerns me most are sharp sell-offs due to overheating and mania. Don’t ever let anyone tell you “this time is different” if fears of the dot-com bubble are discussed. History repeats itself, especially in markets.

It is very hard to say with conviction to sell your tech shares though. However, as I said before – if the RSI exceeds 70 again – consider selling some shares and taking profits. For now, however, the NASDAQ stays a HOLD .

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

COVID-19 Vaccine Review – Pre-Orders, Approvals, and Prioritizations

With a number of nations in the process of delivering vaccines to high priority recipients, the focus is now shifting to the timelines.

Key considerations for governments as well as the global financial markets include:

  • Preorders: Vaccine costs means that some governments are unable to order enough vaccine doses until cheaper options are available. This means that only a small percentage of some populations will receive vaccines, leaving the remainder exposed.
  • Vaccine availability: This not only includes dose production capacities but allocation by country.
  • Vaccine approval: While a number of nations have approved COVID-19 vaccines, the large majority have yet to do so.
  • Prioritization: As has been the case in the UK and the U.S, government agencies will need to prioritize vaccine recipients. There need to be enough doses to vaccinate the most vulnerable. Any shortfall will raise doubts over whether the pandemic can be brought under control.

Pre-orders

A number of countries were swift in pre-ordering COVID-19 vaccines from pharmas. Governments had placed orders well in advance of any clinical trial results.

In viewing pre-order numbers, richer nations pre-ordered from multiple pharmas. Governments also ordered in excess of total populations in some cases. The excess orders were likely made to ensure sufficient doses, with the availability of vaccines likely to be staggered.

BioNTech/Pfizer Inc. was the first to receive emergency approval, with Moderna Inc. and AstraZeneca next in line.

Looking at pre-orders across the most adversely affected nations, the numbers are quite telling:

  • The U.S: 700 million doses.
    • Pfizer Inc.: 100 million.
    • Moderna Inc.: 100 million.
    • AstraZeneca: 500 million.
  • The EU: 700 million doses.
    • Pfizer Inc.: 300 million.
    • AstraZeneca: 400 million.
  • India: 500 million doses.
    • AstraZeneca: 500 million doses.
  • Japan: 290 million doses.
    • Pfizer Inc.: 120 million.
    • Moderna Inc.: 50 million.
    • AstraZeneca: 120 million.
  • The UK: 145 million doses.
    • Pfizer Inc.: 40 million.
    • Moderna Inc.: 5 million.
    • AstraZeneca: 100 million.
  • Brazil: 100 million doses.
    • AstraZeneca: 100 million.
  • Indonesia: 100 million doses.
    • AstraZeneca: 100 million.
  • China: 100 million doses.
    • Pfizer Inc.: 100 million.
  • Canada: 96 million doses.
    • Pfizer Inc.: 20 million.
    • Moderna Inc.: 56 million.
    • AstraZeneca: 20 million.
  • Australia: 43.8 million doses.
    • Pfizer Inc.: 10 million.
    • AstraZeneca: 33.8 million.

While the number of pre-orders is on the higher side, it is worth noting, however, that more than 1 dose is required for effective inoculation.

This means that, for the U.S, there are sufficient doses to vaccinate the entire population. This is not the case for many of the above countries, however.

Vaccine and Population Coverage

Assuming that each nation eventually receives all pre-ordered vaccines from the three leading pharmas, vaccine coverage is as follows:

Canada: 127.7% coverage.

Japan: 114.6% coverage.

The UK: 108.7% coverage.

The U.S: 106.6% coverage.

All other governments have pre-ordered vaccine doses that fall short of total population numbers.

Australia (87.6%) and the EU (78.2%) currently fall short but will likely be in a position to bridge the gap as more vaccines become available.

Other nations, however, will likely be in for a long wait. For poorer nations, a cost-effective, single-dose vaccine is needed. As importantly, will be storage requirements for the vaccines. Poorer nations, for instance, may not be able to store and distribute the BioNTech/Pfizer Inc. vaccine.

Amongst the most adversely affected COVID-19 nations, two nations stand out in terms of population coverage.

These are Brazil, which has pre-ordered doses to vaccinate 23.9% of the population, and India. The Indian government has pre-ordered enough doses to vaccinate just 18.5% of the population.

From the numbers alone, a clear divide exists across the globe and, more importantly, suggests that the pandemic will remain for some time to come.

The Latest COVID-19 Numbers

Mindful of the above vaccine to population coverage figures, it is worth noting the latest COVID-19 cases.

At the time of writing, the total number of COVID-19 cases stood at 74,526,806, of which 52,363,010 have recovered. Total COVID-19 related deaths currently stand at 1,655,044.

By Country:

  • The United States: 17,392,618 has reported cases, which accounts for almost a quarter of all cases worldwide. Total deaths stand at 314,577, accounting for almost one-fifth of total deaths. Total population: 331.0m.
  • India: 9,951,072 reported cases, with 144,487 related deaths. Total population: 1,380.0m.
  • Indonesia: 636,154 reported cases, with 19,248 related deaths. Total population: 273.5m.
  • Brazil: 7,042,695 reported cases, with 183,822 related deaths. Total population: 212.6m.
  • Japan: 184,042 reported cases, with 2,688 related deaths. Total population: 126.5m.
  • The UK: 1,913,277 reported cases, with 65,520 related deaths. Total population: 67.9m.
  • Canada: 481,630 reported cases, with 13,799 related deaths. Total population: 37.7m.
  • Australia: 28,081 reported cases, with 908 related deaths. Total population: 25.5m.

While easier to consider for the above nations, vaccine allocation across the EU is a more complicated matter.

Some nations are more adversely impacted than others, these being France, Germany, Italy, and Spain. It is therefore more likely that these nations would receive a greater allocation than the likes of Estonia, which has only reported 19,271 cases.

For France, Germany, Italy, and Spain, the total number of reported cases stands at 7,487,259, with 198,935 related deaths. Combined population: 256.3m.

Other Adversely Affected Nations

  • Russia: 2,734,454 reported cases, with 48,564 related deaths. Total population: 145.9m. Unlike most other nations, however, Russia has developed its own Sputnik V vaccine. Vaccinations have commenced countrywide and Sputnik V is likely to be made available to other nations. Countries such as India are reportedly considering sizeable orders.
  • Turkey: 1,928,165 reported cases, with 17,121 related deaths. Total population: 84.3m.
  • Argentina: 1,517,046 reported cases, with 41,365 related deaths. Total population: 45.2m.
  • China: 86,777 reported cases, with 4,634 related deaths. Total population: 1,439.3m.

When considering the total number of reported cases and deaths and effective containment measures, there is a reason for some nations to hold back from 100% population coverage.

Australia, amongst a number of other nations, were effective in preventing a far higher number of cases. Vaccinations in major cities, as opposed to rural areas, would likely deliver adequate protection against the virus.

For countries, such as Brazil and India, however, the COVID-19 numbers suggest that far greater coverage is needed.

A lack of vaccine coverage should therefore be a concern until cheaper alternatives are available.

Other Pharmas / Vaccines

A number of other pharmas are in the midst of clinical trials, with vaccines likely to be available early next year.

These include Johnson & Johnson, which has been playing catch up in the last few months. From Russia and China, there are also two vaccines that are drawing international interest:

Sputnik V: The Gamaleya Research Centre, which has developed the Sputnik V vaccine has announced up to 2-years of immunity against COVID-19. This is far greater than those of BioNTech/Pfizer Inc. and Modena Inc. that are likely to offer up to five months of immunization. Additionally, the vaccine has a reported efficacy rate of 91.4%.

While countries such as the U.S may refrain from ordering Russia’s Sputnik V, Brazil, India, and other adversely affected countries will likely benefit.

Sinopharm: China produced, there are reports that as many as 1 billion doses of China’s vaccine will be available next year. China is not solely reliant upon domestic vaccines and has pre-ordered the WHO-backed COVAX and 100 million Pfizer Inc. doses. The UAE is currently administering the Sinopharm vaccine.

Vaccine Approvals

The next step in the fight to end the COVID-19 pandemic is for government agencies to approve vaccines.

To date, Bahrain, Saudi Arabia, Singapore, the UK, and the U.S have approved the BioNTech/Pfizer Inc. vaccine. As previously mentioned, other vaccines are already being administered, though more approvals are needed.

Later today, the FDA is also set to review the Moderna Inc. EUA, with emergency approval anticipated following the review findings earlier in the week.

The EU has also had to bring forward its review timelines, with the EMA set to review the Pfizer Inc. vaccine on 21st December. This had been originally diarized for mid-January.

In the UK, AstraZeneca is also expecting emergency approval. As was the case with the Pfizer Inc. vaccine, other nations will likely follow. An MHRA emergency approval could be given this week or next.

For India, completion of the Sputnik V clinical trials will then allow the review process to begin.

Vaccine Prioritization

As pharmas begin to deliver vaccines across the world, government agencies have had to prioritize vaccine recipients.

The general trend has been to prioritize the most vulnerable. These include front line workers, such as 1st respondents and care home facility workers, and elderly patients.

A number of key agencies have announced the following priorities:

UK: The Joint Committee on Vaccination and Immunisation (“JCVI”): The UK’s “JCVI” announced that the first priorities should be the prevention of COVID-19 mortality and the protection of health and social care staff and systems.

U.S: The CDC’s phase sequence leaves adults with high-risk medical conditions and the over 65s in phase 1c.

In phase 1a are healthcare personnel and LTCF residents, with phase 1b including essential workers.

The EU: The European Centre for Disease Prevention and Control provided guidance on prioritization earlier this month. As was the case with the U.S and the UK, healthcare workers, the elderly, and persons with certain comorbidities form the priority groups. Due to likely shortage, however, groups will likely become smaller.

Supply Chain and Production Targets

As more nations approve the COVID-19 vaccines, the pressure will mount on pharmas to produce more doses to meet demand.

Beyond AstraZeneca and Johnson & Johnson, more vaccine options are going to be needed to bring an end to the pandemic.

Key through the remainder of this year and the 1st quarter of next year, however, will be the vaccination of high priority groups.

Success in vaccinating the most at risk in a timely manner will then bring forward the timelines to vaccinate general populations.

We can expect further priorities to be issued, which will likely be dependent upon the vaccination process in the coming months.

Countries may have pre-ordered sufficient doses for total population coverage. These counties will need to receive these orders, however, to bring the virus under control.

Assuming that there are no adverse effects from vaccines becoming available, the focus will remain on production, distribution, and new vaccines to market.

Once mass inoculation is in process, an end to the pandemic will be in sight.

Stocks Surge on Stimulus Hopes

Stocks rose sharply on Tuesday (Dec. 15) as optimism grew that Congress could pass another economic stimulus package before year’s end.

News Recap

  • The Dow Jones gained 337.76 points, or 1.1%, and closed at 30,199.31. The S&P 500 also gained 1.3% and snapped a four-day losing streak. The tech-heavy Nasdaq climbed 1.3% and reached a new record closing high of 12,595.06. However, the Russell 2000 small-cap index once again beat the other indices and gained 2.40%.
  • In the strongest indication yet that we may be coming closer to a stimulus agreement, the top four congressional leaders-House Speaker Nancy Pelosi, Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, and House Minority Leader Kevin McCarthy – all were set to meet after market close on Tuesday (Dec. 15).
  • Democrats and Republicans still remain deeply divided on certain matters, but a two-part bipartisan stimulus plan proposed on Tuesday (Dec. 15) has a chance of passing.
  • The stimulus package would provide around $908 billion in total aid. The first part would be a $748 billion stimulus package that includes an additional $300 per week in federal unemployment benefits and another $300 billion for more PPP loans. This segment would also include money for vaccine distribution, education, and rental assistance. The second segment would be a $160 billion aid package and cover the more partisan issues of business liability protections and financial aid to state and local governments.
  • The first round of shots from the vaccine developed by Pfizer and BioNTech were given in the U.S. on Monday (Dec. 14) with further distributions occurring Tuesday (Dec. 15).
  • FDA staff announced that they endorsed emergency usage of Moderna’s vaccine. The FDA’s vaccine advisory panel will meet Thursday (Dec. 16) to decide whether to recommend clearance for emergency use. Upon authorization, government officials plan to ship nearly 6 million doses of Moderna’s vaccine in addition to the 2.9 million Pfizer doses already in distribution.
  • Apple led the Dow higher, jumping 5% after Nikkei reported that the company will increase iPhone production by about 30% in the first half of 2021.
  • All 11 S&P 500 sectors gained on Tuesday (Dec. 15) and were led by energy and utilities.
  • We are approaching the darkest days of the COVID-19 pandemic yet. 300,000 people across the country have now lost their lives to the disease. However, the worst may not be over yet. According to the CDC Director Robert Redfield, US COVID-19 deaths are likely to exceed the 9/11 death toll for the next 60 days.

The short-term may see some pain and/or mixed sentiment due to two major catalysts – the lack of stimulus and an out-of-control virus.

According to Art Hogan , chief market strategist at National Securities:

“There’s been a tug of war between the vaccine news and the virus news. The only tiebreaker that’s kept the averages on their way higher seems to be the potential for getting stimulus out of gridlock…It certainly feels like one of the proposals that’s on the table … can go through.”

Additionally, Luke Tilley , chief economist at Wilmington Trust, said that another stimulus package was needed to keep the economic recovery from stalling before a mass distribution of a vaccine.

“With the continued rising cases and mass vaccinations still a ways out, we could see some further weakness in jobs and even a flattening where we’re not even adding jobs at all … that’s absolutely a possibility for this next jobs report,” Tilley said. “And if we were to not get another stimulus package, you’re going to have 10 to 11 million people fall off the unemployment rolls right away, and that would hit spending as well.”

On the other hand, the mid-term and long-term optimism is very real. While there may be some semblance of a “Santa Claus Rally” occurring, the general consensus between market strategists is to look past the short-term pain, and focus on the longer-term gains.

According to Robert Dye, Comerica Bank Chief Economist :

“I am pretty bullish on the second half of next year, but the trouble is we have to get there…As we all know, we’re facing a lot of near-term risks. But I think when we get into the second half of next year, we get the vaccine behind us, we’ve got a lot of consumer optimism, business optimism coming up and a huge amount of pent-up demand to spend out with very low interest rates.”

In the short-term, there will be some optimistic and pessimistic days. On some days, like Monday (Dec. 14), the broader “pandemic” market trend will happen – cyclical and recovery stocks lagging, and tech and “stay-at-home” stocks leading. On other days, like Tuesday (Dec. 15), there will be a broad market rally due to optimism and 2021 related euphoria. On other days (and in my opinion this will be most trading days), markets will trade largely mixed, sideways, and reflect uncertainty.

However, if a stimulus deal passes before the end of the year, all bets are off. It could mean very good things for short-term market gains.

In the mid-term and long-term, there is certainly a light at the end of the tunnel. Once this pandemic is finally brought under control and vaccines are mass deployed, volatility will stabilize, and optimism and relief will permeate the markets. Stocks especially dependent on a rapid recovery and reopening such as small-caps should thrive.

Due to this tug of war between sentiments though, it is truly a challenge to predict the future with certainty.

Therefore, to sum it up:

While there is long-term optimism, there is short-term pessimism. A short-term correction is very possible. But it is hard to say with conviction that a big correction will happen.

The premium analysis this morning will showcase a “Drivers and Divers” section that will break down some sectors that are in and out of favor. As a token of my appreciation for your patronage, I decided to give you a free sample of a “driver” and “diver” sector. Do me a favor and let me know what you think of this segment! Always happy to hear from you.

Driving

Energy (XLE)

Energy is a sector largely dependent on sentiment, with several question marks.

On one hand, if you are bullish, all of this vaccine news bodes well for a full economic reopening by the second half of 2021. That means travel, and therefore fuel demand, could surge back to pre-pandemic levels. WTI crude futures on Tuesday (Dec. 15) extended gains to trade around 1% higher at $47.5 a barrel due to cautious optimism on further US stimulus in addition to the vaccine(s).

On the other hand, there are very real short-term concerns. There are fresh concerns over global fuel demand as countries, states, and cities across the world tighten coronavirus restrictions. Germany and the Netherlands will enter a new lockdown, while the UK government imposed tighter Covid-19 measures on London. In New York City, Mayor Bill De Blasio warned that the city is on the path towards a second full shutdown. Governor Andrew Cuomo already banned all indoor dining.

The newly inaugurated Mayor of Baltimore, Brandon Scott, also banned all dining – both indoor and outdoor. OPEC also lowered its projections for global fuel consumption in Q1 2021 by 1 million barrels a day as well. The organization will meet on January 4th to evaluate if they can move on with supply increases. Much anticipated data from the EIA is also due on Wednesday.

This is such an unpredictable sector experiencing great volatility. It is almost as if energy is either the S&P 500’s leader or its laggard. There is never anything in between. These are simply risky and major percentage swings on a day-to-day basis.

It is a very difficult sector to make a bullish call on. There are still simply too many headwinds to be overly euphoric. While energy is still largely undervalued, and the RSI is no longer overbought, the volume is not stable. Most importantly, nobody truly knows what oil’s long-term prospects are, with the increased adoption of renewable energy and ESG investing.

This year we have seen that when energy rallies, it eventually pulls back. Judging from the chart, that inevitable pullback could possibly come again. For the month of December, the ETF is up nearly 8%. But I would be more confident in either calling BUY or HOLD or a pullback – not during such a volatile time.

While there is vaccine optimism now that there wasn’t before, conditions are largely the same on the ground with regard to COVID-19 and travel demand. Therefore, my call is to take profits and SELL.

Diving

Communication Services (XLC)

I really don’t like this sector and I will explain why. Although the Communication Services ETF touched a 52-week high recently, the gains have not been as stable or as robust compared to other sectors. But this is generally par the course for communications stocks. This is a sector that continuously underperforms other sectors both in the short-term and long-term.

While traditionally this is a good sector to find value in, right now I just don’t see it. I see downside risk without the same type of upside potential as exists in other sectors that may benefit more from a successful vaccine roll-out and economic reopening.

Furthermore, the ETF’s volume is already low, and has been in decline. This screams volatility to me.

I just can’t see how you would benefit buying into this sector. It is hard to foresee how this sector will truly benefit from a vaccine and 2021 reopening relative to other sectors. Therefore, I give it a SELL call.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

COVID-19 Vaccine Update – FDA and the Moderna Inc. Vaccine Review Next Up

The Latest

With the BioNTech/Pfizer Inc. vaccine rolling out across the U.S, Moderna Inc. was also in focus in the early part of the week.

The FDA reported that reviewers found Moderna Inc.’s vaccine to be safe and effective ahead of the FDA decision on the EUA submission.

On Tuesday, the FDA affirmed Moderna Inc.’s high efficacy rate, declaring the vaccine to be 94.1% effective.

The Moderna Inc. approval process is a material one, with Moderna Inc. continuing to estimate the production of 20 million doses over the remainder of the year. When considering the fact that only 2-weeks remain before the end of the year, 20 million doses is a high number.

More impressively, Moderna Inc. is also aiming to 1 billion doses annually, with the support of Italian healthcare solutions provider Lonza.

On Thursday, the FDA is scheduled to meet in order to decide on whether to approve Moderna Inc.’s EUA.

In contrast to the BioNTech/Pfizer Inc. vaccine, however, the Moderna Inc. vaccine has yet to be approved elsewhere. The U.S will, therefore, be the first to administer the Moderna Inc. vaccine.

From the UK, news of allergic reactions to the BioNTech/Pfizer Inc. allowed the FDA to advise hospitals and healthcare centers to prepare for any adverse allergic reactions.

With the Moderna Inc. vaccine also an mRNA vaccine, the previous advice could also be issued.

What’s next?

For the U.S, assuming that the FDA approves Moderna Inc.’s vaccine, another large scale vaccination project will get underway.

The combined doses of BioNTech/Pfizer Inc. and Moderna Inc.’s vaccines will come much closer to the CDC’s phase 1a priority group.

This would then allow the vaccination of phase 1b and 1c groups before the end of the winter.

Other nations that had pre-ordered the Moderna Inc. vaccine included Japan (50 million), the UK (5 million), and Canada (56 million). Canada is reportedly expecting to receive 168,000 doses of the vaccine before the end of the year.

For the EU, however, the EMA was not scheduled to review the BioNTech/Pfizer Inc. until mid-January.  Pressure has reportedly risen on an EU vaccine approval, however, as member states reintroduce lockdown measures. This week, news has hit the wires that the EMA plans to review the vaccines by 23rd December. Approval would mean that high priority groups could begin receiving vaccinations before the end of the year.

According to the EMA website, the CHMP is now due to hold an exceptional meeting on 21st December.

Once the CHMP recommends marketing authorization of the BioNTech/Pfizer Inc. vaccine, the EU Commission will then fast track its decision-making process in order to grant marketing authorization in all EU and EEA Member States within days

Vaccine doses are in short supply, however, so mass vaccinations are not to be expected until late into the 1st quarter, at the earliest.

The Latest COVID-19 Numbers

At the time of writing, the total number of confirmed COVID-19 cases stood at 73,803,320. The total number of U.S cases has risen to 17,143,779 with the total number of related deaths rising to 311,068.

Things are not much better in other parts of the world, as new cases continue to spike.

This continued rise in new cases has led to a reintroduction of lockdown and containment measures.

For this very reason, the EMA has revised its vaccine review timetables to be more aligned with other developed economies

Other Pharmas

With the BioNTech/Pfizer Inc. vaccine now in circulation and Moderna Inc.’s vaccine imminent, there will be a need for more, however.

To ease production capacity pressures, a single dosage vaccine remains out of reach at present. Pricing pressures also mean that many governments will not be able to vaccinate entire populations.

Therefore, the race for a cost-effective, single-dose vaccine will continue.

AstraZeneca and the University of Oxford are also hoping for their vaccine to receive approval British before the end of the year.

According to news reports, the UK drug regulator, the MHRA, is due to approve the vaccine. There is some uncertainty, however, on whether the MHRA will approve the 1-and-a-half dose or 2 dose vaccine. Efficacy rates were 92% and 62% respectively.

The Global Financial Markets

On Tuesday, Moderna Inc.’s share price slid by 5% on the day. The slide came in spite of the FDA’s likely imminent approval.

This week, AstraZeneca’s share price also hit reverse on news of plans to purchase Alexion for $39bn…

While Pfizer Inc. also saw its share price fall on Tuesday, Johnson & Johnson’s stock price rose by 1.01%.

Having lagged the front runners, Johnson & Johnson is now the main contender to deliver a 3rd vaccine to the U.S.

Both Johnson & Johnson and AstraZeneca vaccines will need approvals, however, to have any viable chance of bringing an end to the COVID-19 pandemic.

For the major indexes, the continued progress towards multiple vaccines has allowed the markets to look beyond the latest COVID-19 numbers for now.

Key in the coming weeks will be the timelines for approvals, however, and production estimates.

COVID-19 Vaccine Update – Pfizer Inc. Approval Imminent Amidst a Virus Surge

The Latest

On Thursday, U.S FDA advisors had voted 17-4 in favor of the BioNTech/Pfizer Inc. mRNA vaccine. The vaccine vote was for the FDA approval to be inclusive of 16 and 17-year-olds. Some FDA advisors were reportedly uncomfortable including the lower age bracket, however, which resulted in 4 votes against.

Over the course of the week, a continued rise in new COVID-19 cases and 3,000 related deaths each day mounted pressure on the FDA for rapid approval.

The markets had anticipated an FDA approval in a matter of days.

On Friday, however, the FDA notified BioNTech/Pfizer Inc. that it plans to authorize the use of the mRNA vaccine in the U.S.

There were reports, following the panel vote on Thursday that White House pressure was needed to force a swift FDA response to the panel vote.

Trump was back on Twitter on Friday, this time targeting the FDA.

It was another big week on the vaccine front. With an FDA green light now imminent and the UK already in vaccination mode, Canada’s health regulator also approved the Pfizer Inc. vaccine in the week.

Canada joined Bahrain, Britain, and Saudi Arabia as the first nations to approve the vaccine, with the U.S likely to be next to join a rapidly growing list.

What’s next?

For the U.S, the federal government’s vaccine distribution program will begin within 24-hours of approval. Known as Operation Warp Speed, the government will liaise with Pfizer Inc. to deliver the vaccine to the most vulnerable by the early part of next week.

As the FDA readies to formally approve the BioNTech/Pfizer Inc. EUA, the FDA is also due to review the Moderna Inc. vaccine next week.

There will be mounting pressure for more rapid review times as other pharmas begin to complete clinical trials.

With around 21 million healthcare personal and approximately 3 million long-term care facility residents (“LTCF”), Pfizer Inc. and Moderna Inc. will not have sufficient doses produced to vaccinate phase 1a recipients this year.

Following BioNTech/Pfizer Inc.’s supply chain issues, the U.S is now reportedly due to receive just 6.4 million doses this month. That falls well short of the 24 million phase 1a recipients prioritized by the CDC, let alone the 330 million U.S population.

The Latest COVID-19 Numbers

At the time of writing, the total number of confirmed COVID-19 cases stood at 71,414,262. The total number of U.S cases has risen to 16,290,412, with the total number of related deaths rising to 302,727.

Things are not much better in other parts of the world, with new cases continue to spike in the winter months.

This continued rise in new cases will place additional pressure on other nations to catch up with Britain and the few others that have already approved the vaccine.

For the EU, the EMA is not due to review the vaccine for another month…

Other Pharmas

With the BioNTech/Pfizer Inc. vaccine now being delivered and orders mounting, Moderna Inc. is next.

Last week, news of Sanofi and GlaxoSmithKline’s vaccine showing inadequate immune response in clinical trials was a blow.

This comes off the back of issues raised over AstraZeneca and the University of Oxford’s clinical trial parameters. With AstraZeneca having kicked off a global clinical trial just weeks, hopes are that a 3rd vaccine could be approved in early January.

With the pressure to deliver an effective vaccine building, news hit the wires on Friday of AstraZeneca joining Russian scientists in a bid to improve efficacy rates. British and Russian scientists are reportedly planning to see whether combining the respective shots would deliver better results.

Clinical trials are due to start at the end of the year. AstraZeneca will also be combining its vaccine with the BioNTech/Pfizer Inc. vaccine, with clinical trials set to start in January.

Based on the latest news, Johnson & Johnson is also aiming to deliver a vaccine in early 2021.

Expectations are that inoculations beyond high priority recipients would begin towards the end of the 1st quarter. This would be aligned with Johnson & Johnson and AstraZeneca’s conclusion of clinical trials and regulatory approvals.

The Global Financial Markets

While country approvals of BioNTech/Pfizer Inc.’s vaccine are positive, too few countries have approved the vaccine to-date.

Production capacity issues also mean that countries will not receive enough doses to vaccinate entire populations.

This leaves countries and economies at the mercy of the COVID-19 pandemic for longer than would be liked.

Once there are 3 to 4 effective vaccines available in the market place, however, conditions should improve.

An end to the winter flu season coinciding with widely available COVID-19 vaccines would allow governments to begin to fully reopen economies.

We should then see a more meaningful economic recovery, supported by both fiscal and monetary policy measures.

Some nations will lag, however. Delays in ordering vaccinations and the high price of the BioNTech/Pfizer Inc. and Moderna Inc. vaccines means that some nations will have to wait.

These economies will suffer for longer before any recovery can begin in earnest.

COVID-19 Vaccine Update – It’s All Eyes on the FDA and BioNTech/Pfizer Inc.

The Latest

It’s a big day on the COVID-19 vaccine front, with the FDA scheduled to review BioNTech/Pfizer Inc.’s mRNA vaccine later today.

Lagging behind the UK approval that came last week, there will be plenty of pressure on the FDA to give the approval.

COVID-19 cases across the U.S continues to rise as U.S states make their way through the winter months.

Approval would mean that BioNTech/Pfizer Inc. will be able to begin distributing vaccines as early as the weekend.

Unfortunately, supply chain issues have meant that vaccine production for the year will be as much as 50% lower than initially forecasted.

This means that the continued rise in new COVID-19 cases across the U.S is unlikely to abate anytime soon.

What’s next?

Assuming that the FDA approves BioNTech/Pfizer Inc.’s EUA, the U.S government is due to receive 25 million doses by the end of the year.

That just covers 12.5 million of more than 330 million people living in the U.S.

When considering the CDC’s high priority vaccine recipients, the number of vaccines is not enough to cover the first priority group.

This will leave doctors, nurses, lab technicians, and EMT and hospital staff at risk, not to mention the most vulnerable.

With prioritization ultimately sitting at the state level rather than the Federal level this will leave the most adversely affected states vulnerable to further spikes.

Based on the sheer numbers, Moderna Inc. and AstraZeneca will need to also be in a position to ease demand pressures.

The CDC’s phase sequence leaves adults with high-risk medical conditions and the over 65s in phase 1c.

In phase 1a are healthcare personnel and LTCF residents, with phase 1b including essential workers.

To put it into perspective, the CDC also provided estimate numbers of vaccine recipients within the phase 1a category:

  • Healthcare personnel – Approx. 21million.
  • Long-term Care Facility Residents (LTCF) – Approx. 3 million.

A total of 25 million BioNTech/Pfizer Inc. doses are not enough to cover healthcare personnel, let alone LTCF and phase 1b and phase 1c recipients.

With Moderna Inc. and AstraZeneca also delivering vaccines, the reality is that a single dose vaccine is needed.

The Latest COVID-19 Numbers

At the time of writing, the total number of confirmed COVID-19 cases stood at 69,381,422. Conditions in the U.S and parts of Europe have continued to deteriorate. The total number of U.S cases has risen to 15,824,444.

India and Brazil have reported a total of 9,767,371 and 6,673,118 cases respectively, sitting behind the U.S as the worst affected.

France (2,324,216), Italy (1,770,149), Spain (1,725,473), and Germany (1,245,729) are also in desperate need of a vaccine. For the EU, however, vaccine reviews are not due until next month.

Other Pharmas

While BioNTech/Pfizer Inc. and Moderna Inc. are leading the race, there is a desperate need for more vaccines.

In reality, there is not only the need for more vaccines but single-dose vaccines.

This week, Johnson & Johnson announced that results from clinical trials will be released earlier than previously expected.

More good news is going to be needed for there to be a credible threat to the COVID-19 pandemic.

Trust issues mean that vaccines from countries such as China and Russia would unlikely be considered for review.

This leaves the door ajar for the rest of the major pharmas to deliver. These include but are not limited to the following:

U.S Headquartered

Mateon Therapeutics: Listed on OTCMKTS (“MATN”) and headquartered in California.

Merck & Co.: Listed on the New York Stock Exchange (“MRK”) and headquartered in New Jersey, USA.

Moderna Inc.: Listed on the NASDAQ (“MRNA”) and headquartered in Cambridge, Massachusetts, USA.

Pfizer Inc.: Listed on the New York Stock Exchange (“PFE”) and headquartered in New York City. (Pfizer Inc. has partnered with Germany’s BioNTech SE)

Sorrento Therapeutics: Listed on the NASDAQ (“SRNE”) and headquartered in California. Currently trailing many of the front runners in the race for an effective vaccine.

Talem Therapeutics: This is a wholly-owned subsidiary of ImmunoPrecise Antibodies USA. Its parent company, ImmunoPrecise Antibodies Ltd is listed on the Toronto Stock Exchange.

Tonix Pharmaceuticals: Listed on the NASDAQ (“TNXP”) and headquartered in New Jersey.

Europe Headquartered

AstraZeneca: Listed on the London Stock Exchange (“AZN”) and headquartered in Cambridge, England and Sodertalje, Sweden.

GlaxoSmithKline: Listed on the London Stock Exchange (“GSK”) and headquartered in Brentford, England.

Grifols, S.A: Listed on the Bolsa de Madrid (“GRF”) and headquartered in Barcelona, Spain.

Asia Headquartered:

GC Pharma: Listed on the Korea Stock Exchange (“006280”) and headquartered in Yongin, South Korea.

The Global Financial Markets

Progress by the leading pharmas continues to support riskier assets. Hopes of other pharmas completing successful trials have also provided support.

Clinical trial results, however, will need to deliver impressive numbers for a global end to the COVID-19 pandemic.

Failure for other pharmas to begin rolling out vaccines will test support for riskier assets.

The sheer numbers needing vaccines on the front line mean that other high priority recipients remain exposed. Therefore, a credible threat remains to the likes of the EU and beyond that have fallen behind Britain, and possibly the U.S, on approving effective vaccines for circulation.

COVID-19 Vaccine Update – It is all Eyes on UK Vaccinations and the FDA This Week

The Latest

Last week, Pfizer Inc. cut its mRNA vaccine production numbers as a result of supply chain issues. Quality control issues led to Pfizer Inc. cutting its projected doses for the year by as much as 50%.

The announcement was a reality check for the markets, with the pharmas in need of an unprecedented amount of raw materials to meet government pre-orders that have been placed globally.

In recent weeks, we had identified production and supply as the next key areas of focus for governments and the markets.

Production and supply bottlenecks would certainly raise questions over how quickly and effectively the COVID-19 pandemic can be stamped out.

Following the announcement that BioNTech/Pfizer Inc. would produce 50 million doses, allocation now also becomes an area of focus.

The UK was the first to approve BioNTech/Pfizer Inc.’s vaccine, with the UK government having pre-ordered 145 million doses of the BioNTech/Pfizer Inc. vaccine.

With doses in shorter supply than had initially been expected, the government is expecting 800,000 doses this week.

As the UK government readies to begin vaccinating high-risk groups, prioritized by the Government’s Joint Committee on Vaccination and Immunisation (“JCVI”), governments globally and the markets will be looking for any logistical issues.

BioNTech/Pfizer Inc. will also need to meet the 800,000 dose promise. Failure to deliver on the lower number and expect increased concern over the ability to any meet pre-orders.

What’s next?

The FDA is set to review the BioNTech/Pfizer Inc. vaccine on Thursday. Assuming that there are no issues in approving the vaccine, the U.S will be next in line to receive the mRNA vaccine.

Ahead of the FDA review, the CDC has also had to prioritize vaccinations in the U.S.

BioNTech/Pfizer Inc. expects to deliver 25 million doses to the U.S before the end of the year. That’s enough to vaccinate just 12.5 million of more than 330 million people living in the U.S.

Last week, the CDC identified doctors, nurses, lab technicians, and EMT and hospital staff as first priority. The CDC also recommended that employees and residents of long-term care centers also fall into the first priority bracket.

While the onus normally falls on individual states to prioritize, it is expected that the CDC prioritization will be followed.

Beyond the first priority list, the next group is to include older adults, those with underlying medical issues, and essential workers.

For those that fall out of these groups, doses are unlikely to be available until the 2nd quarter of next year, at the earliest. This is assuming that there are no further supply chain issues or production bottlenecks.

Based on the sheer numbers, Moderna Inc. and AstraZeneca will need to also be in a position to ease demand pressures.

With AstraZeneca having only recently kicked off global trials, however, it could be some time before a 3rd vaccine is available.

The Economic Outlook

Based on the considerations above, vaccines will reach some nations more quickly than others. In fact, when considering government pre-orders from amongst the most adversely affected nations, some pre-orders fall woefully short of numbers needed to stem the rise in new cases.

On this basis, economic hardship in developing economies, in particular, are unlikely to subside any time soon.

Coupled with the global economic meltdown, this does mean that it will take years for some economies to recover.

The good news is, however, that economies more reliant upon tourism may begin to create travel bubbles with nations receiving the vaccine doses in higher numbers.

These nations would include Canada, the UK, and the U.S, who have pre-ordered more doses than total populations. Australia and the EU have also pre-ordered doses to vaccinate a significant size of the respective populations.

By contrast, however, India (18.5%) and Brazil (23.9%) fall woefully short, for example, and may remain in isolation for an extended period of time.

The Latest COVID-19 Numbers

When considering the continued rise in new COVID-19 cases, delivery of the doses could not be more critical.

At the time of writing, the total number of confirmed COVID-19 cases stood at 67,385,285. Conditions in the U.S continued to deteriorate, with the total number of cases rising to 15,159,529.

India and Brazil have reported a total of 9,676,801 and 6,603,540 new cases respectively, sitting behind the U.S as the worst affected.

France (2,292,497), Italy (1,728,878), Spain (1,699,145), and Germany (1,184,845) are also in desperate need of a vaccine. These numbers would have been far worse had the respective governments not reintroduced containment measures last month.

For the EU, however, the EMA will not review the Pfizer Inc. and Moderna Inc. vaccines until mid-January. When considering the sheer number of pre-orders, it may also be some time before EU member states are able to vaccinate a good proportion of the population.

With the vast number of doses in demand, the need to prioritize will likely create plenty of tension.  Any uncertainty over meeting projected dosage numbers for this year and next and risk aversion may well hit the markets.

There is also the vaccine’s actual effectiveness in the real world that will likely face scrutiny. Last week, Pfizer Inc. CEO Albert Bourla had reportedly stated that he was not certain if the vaccine would prevent transmission.

This uncertainty certainly causes more pain for governments looking to end the spread of the coronavirus…

COVID-19 Vaccine Update – The UK Wastes No Time as MHRA Approves Vaccine

The Latest

BioNTech and Pfizer Inc. became the first pharma to have their mRNA COVID-19 vaccine approved on Wednesday.

The UK’s Medical & Healthcare Products Regulatory Agency (“MHRA”) became the first agency to approve a COVID-19 vaccine.

With the UK suffering at the hands of the COVID-19 pandemic, the independent regulator wasted little time.

The UK Government has pre-ordered 145 million doses of COVID-19 vaccines from Pfizer Inc., Moderna Inc., and AstraZeneca. Of the 145 million doses, the government has pre-ordered 40 million from BioNTech/Pfizer Inc.

With an efficacy rate of 95% and effective across all age groups, the first doses of the vaccine are due to arrive in days.

The UK Government announced that a first batch of 800,000 doses forms part of an expected 10 million doses by the end of the year.

With the vaccine coming in 2 doses, 5 million patients will receive inoculation if BioNTech/Pfizer Inc. delivers the full quota.

The Government’s Joint Committee on Vaccination and Immunisation (“JCVI”) affirmed on Wednesday that the first priorities should be the prevention of COVID-19 mortality and the protection of health and social care staff and systems.

The JVIC has given older adult residents in care homes the highest priority for vaccination, followed by care home workers.

Secondary priorities could include vaccination of those at increased risk of hospitalization and at an increased risk of exposure.

Logistics will now need to be in place to transport the vaccine, at -70C, for administration across the UK.

How the Markets Reacted

The FTSE100 rose by 1.23% on Wednesday, with the upside coming off the back of the MHRA announcement.

For the European majors, while it was a mixed day, the DAX30 and CAC40 came off lows in response to the news.

BioNTech SE share price rose by 6.21% in response to the news. Pfizer Inc. ended the day up by a more modest 3.51%.

While trailing Pfizer Inc. in the race to deliver a global vaccine, there was also support for AstraZeneca and Moderna Inc., which rose by 1.26% and by 1.41% respectively.

What’s next?

With UK regulators beating the FDA and the EU’s European Medicines Agency (“EMA”) to the punch, BioNTech/Pfizer Inc. will now need to deliver the doses.

There’s no trial run for BioNTech/Pfizer Inc. in terms of delivering the doses in a timely manner.

Both BioNTech/Pfizer Inc. and the government will likely face logistical challenges and the markets and governments from overseas will likely watch closely.

Successful distribution and administration of the first batch are now key. For the FDA and the EMA, both will have the benefit of the UK government’s experiences in distribution and vaccination.

The FDA is set to review the BioNTech/Pfizer Inc. vaccine on 10th December. In the New Year, the EMA review is due on 12th January.

Key areas of focus in the coming weeks will be production and distribution and geographical allocation.

The EU has pre-ordered 300 million doses of the BioNTech/Pfizer Inc. vaccine, with the U.S pre-ordering 100 million and an option for an additional 500 million doses.

BioNTech/Pfizer Inc. has projected between 5 million to 50 million doses to be available by the end of the year.

The UK is due to receive 10 million doses, which leaves 40 million assuming that 50 million doses are produced.

With the EU review of the vaccine not due until mid-January, that leaves the U.S and Japan in focus. While the U.S has pre-ordered 100 million, Japan has pre-ordered 120 million of the BioNTech/Pfizer Inc. vaccine.

Pressure may mount on the likes of the EMA to bring forward vaccine reviews. BioNTech/Pfizer Inc. may also feel increased pressure to deliver on the higher side of production forecasts…

Stocks Retreat As Traders Are Not Impressed With The Restart Of Stimulus Talks

Stimulus Negotiations Are Back Into Spotlight

U.S. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi talked about the potential stimulus package for the first time after the presidential election.

At first glance, Republicans and Democrats remain far apart. Senate leader Mitch McConnell wants to include a targeted relief bill into the $1.4 trillion funding bill for the government, but Democrats will likely oppose this proposal.

Meanwhile, a group of lawmakers unveiled a new coronavirus aid package plan worth $908 billion, which is aimed at bridging the gap between Republicans and Democrats.

It remains to be seen whether both sides are ready to reach a compromise deal. The market is not impressed, and S&P 500 futures are losing ground in premarket trading.

ADP Employment Data Disappoints

The U.S. has just released ADP Employment Change report which indicated that private businesses hired 307,000 workers in November. Analysts expected that the ADP Employment Change report will show that about 400,000 jobs were added.

The report shows that the second wave of coronavirus has started to put material pressure on the job market. Traders will soon have a chance to take a look at additional employment data. On Thursday, Initial Jobless Claims and Continuing Jobless Claims reports will be released. Analysts expect Initial Jobless Claims of 775,000 and Continuing Jobless Claims of 5.9 million.

On Friday, market’s focus will shift to Non Farm Payrolls and Unemployment Rate reports. The Non Farm Payrolls report is projected to show that the economy added 481,000 jobs in November while Unemployment Rate is expected to decline to 6.9% to 6.8%.

If these reports confirm that the recovery of the job market is slowing down, stocks may find themselves under pressure.

UK Approves Pfizer’s COVID-19 Vaccine

UK has just approved the coronavirus vaccine developed by Pfizer and BioNTech. Vaccinations are expected to begin early next week.

Not surprisingly, Pfizer and BioNTech shares are gaining ground in premarket trading.

The reaction of the broader market is muted. Perhaps, traders wait for the approval of Pfizer/BioNTech and Moderna‘s vaccines in the U.S.

For a look at all of today’s economic events, check out our economic calendar.