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.

Pfizer’s 2021 Earnings to be $3-3.10 Per Share, Says CEO Bourla

The world’s largest pharmaceutical company Pfizer is likely to post this year’s earnings in the range of $3 to $3.10 per share, according to chief executive officer Albert Bourla, speaking at a JP Morgan healthcare conference, Reuters reported.

That is also in line with the market expectations of $3.07 per share.

The company which ranked 64th on the 2020 Fortune 500 list of the largest United States corporations by total revenue, is expected to report its fourth-quarter earnings on February 2, 2021.

“We expect $39 billion in COVID-19 vaccine sales in 2021, and we see Pfizer/BioNTech dominating the vaccine market with nearly $14 billion in 2021 sales,” wrote Karen Andersen, sector strategist at Morningstar.

“Although we remain skeptical  of  AstraZeneca’s  ability  to  penetrate  the  U.S. market due to mixed phase 3 data so far, we assume the U.S. will see sufficient supply from Pfizer/BioNTech, Moderna, Novavax (70% probability), and Johnson & Johnson (50% probability)  to  achieve  herd  immunity  by  mid-2021.”

At the time of writing, Pfizer shares traded about 2% lower at $37.05 on Tuesday; the stock fell about 1% in 2020.

Pfizer Stock Price Forecast

Eleven analysts who offered stock ratings for Pfizer in the last three months forecast the average price in 12 months at $42.09 with a high forecast of $53.00 and a low forecast of $36.00.

The average price target represents a 13.97% increase from the last price of $36.93. From those eleven analysts, three rated “Buy”, eight rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $40 with a high of $48 under a bull scenario and $33 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the pharmaceutical company’s stock.

Several other analysts have also recently commented on the stock. Pfizer has been given a $40.00 target price by analysts at The Goldman Sachs. The firm currently has a “neutral” rating. Truist began coverage and issued a “buy” rating with $42.00 price target on the stock. Mizuho raised their price target to $44 from $43 and gave the company a “buy” rating.

In addition, BidaskClub cut shares of Pfizer to a “strong sell” rating from a “sell”. Barclays raised their price target to $37 from $35 and gave the company an “equal weight” rating. At last, Atlantic Securities cut shares to a “neutral” rating from an “overweight” rating and dropped their price target to $39 from $44.

Analyst Comments

“We project solid growth prospects, and the company’s COVID-19 vaccine offers significant accretion potential in 2021. But we expect COVID-19 vaccine sales and profits to decline significantly in 2022 and 2023,” noted David Risinger, equity analyst at Morgan Stanley.

“Pfizer’s dividend is set to adjust down in spring 2021 when Viatris begins paying a dividend. Pipeline execution will be key to investor perception, given late-decade patent expiration exposure.”

Upside and Downside Risks

Risks to Upside: Upside risks are COVID-19 vaccine sales above expectations, competitors’ vaccines less efficacious, core business financial upside, positive pipeline developments, and encouraging strategic action– highlighted by Morgan Stanley.

Risks to Downside: Downside risks are COVID-19 vaccine disappointments, core business shortfalls, pipeline disappointments, disappointing strategic action, and negative US drug pricing developments.

Check out FX Empire’s earnings calendar

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.

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.

COVID-19 Vaccine Update – Production now in Focus after the AstraZeneca Approval

The Latest

There has been plenty of vaccine news over the holidays as efforts continue to deliver more effective COVID-19 vaccines.

AstraZeneca and the University of Oxford vaccine received approval in the UK this week, which was key in the fight to end the COVID-19 pandemic.

The MHRA approved the 2-dose vaccine that will require a 2nd dose to be administered 4-12 weeks after the first dose.

It wasn’t long ago that AstraZeneca and the University of Oxford hit the news wires for all the wrong reasons.

With dosages now cleared up and the ability to store the AstraZeneca vaccine at fridge temperatures, mass vaccination is far simpler across the UK and beyond.

More importantly for the UK, there is also greater control on production and distribution, with the vaccine produced in the UK.

In addition to the Pfizer Inc. and Monero Inc. vaccines, the UK expects to receive an estimated 530,000 doses next week.

In the UK, a total of 616,933 people received the vaccine between 8th and 20th December. The government has ordered 40 million doses of the BioNTech/Pfizer Inc. vaccine and 100 million AstraZeneca doses.

Other vaccines that are also available including Russia’s Sputnik V, which is being considered across other geographies.

What’s next?

While AstraZeneca has received UK approval, receiving FDA and EMA approval from the U.S and the EU will be key.

Before the availability of the vaccine, AstraZeneca had promised not to make a profit from the vaccine. With low storage and transportation costs, each dose is estimated to be £3-£4. This is significantly lower than Pfizer Inc. and Moderna Inc.’s vaccines.

For this very reason, the AstraZeneca/University of Oxford vaccine makes up the lion’s share of the doses that COVAX has secured.

Production numbers and approvals will now be the next area of focus for the AstraZeneca vaccine.

Poorer nations will be reliant upon the AstraZeneca vaccine to end the spread of the virus.

For Johnson & Johnson, a one-dose vaccine could be in circulation by February, according to reports. As clinical trials continue, it will come down to the numbers and safety. The head of Operation Warp Speed delivered the optimistic view, while also stating that the AstraZeneca vaccine could receive FDA approval by April.

The Latest COVID-19 Numbers

At the time of writing, the total number of confirmed COVID-19 cases stood at 83,060,556. The total number of U.S cases has risen to 20,216,991, with the total number of related deaths rising to 350,778.

Behind the U.S, India saw the total number of cases rise to 10,267,283, with Brazil reporting 7,619,970 cases in total.

For France, Germany, Italy, and Spain, the total number of cases stood at 8,316,294, with 221,846 related deaths.

Across the United Kingdom, the total number of cases stood at 2,432,888, with 72,548 related deaths.

Myovant Shares Soar on $4.2 Billion Development Collaboration with Pfizer; Target Price $42

Switzerland-based biopharmaceutical company Myovant Sciences’ shares soared after it announced a collaboration with Pfizer to jointly develop and commercialize relugolix for advanced prostate cancer and relugolix combination tablet for women’s health in the U.S. and Canada.

Following this announcement, Myovant Sciences shares soared as high as 35% to an all-time high of $30.89 on Monday but erased some of those gains on Tuesday. However, the stock is up about 18% so far this week and up nearly 75% so far in 2020.

Myovant will receive up to $4.2 billion, including an upfront payment of $650 million, $200 million in potential regulatory milestones for U.S. Food and Drug Administration approvals for relugolix combination tablet in women’s health, and tiered sales milestones upon reaching certain thresholds up to $2.5 billion in net sales for prostate cancer and also for the combined women’s health indications, the company said in the statement.

If Pfizer exercises the option to commercialize relugolix in oncology outside of the U.S. and Canada, excluding certain Asian countries, Myovant will receive $50 million and be entitled to receive double-digit royalties on sales.

Analyst Comments

“We are pleased that Myovant has found a capable partner ahead of relugolix’s launches. By drawing on Pfizer’s commercial strength in prostate cancer and women’s health, relugolix will be better positioned to rapidly penetrate these competitive markets. We expect that the greater reach and frequency of interactions with physicians now possible through Pfizer’s existing networks will create greater demand for relugolix in the near-term, and allow it to compete with ABBV more effectively over the long haul,” said Phil Nadeau, equity analyst at Cowen and Company.

“We find the deal terms attractive: up to $4.2 billion in upfront and milestone payments, as well as a 50/50 profit and cost split. The upfront payment will help fortify MYOV’s balance sheet and the 50/50 profit and cost split will allow MYOV to more aggressively invest in relugolix’s launch, while still maintaining substantial economics on the franchise,” Nadeau added.

Myovant Sciences Price Forecast

Six analysts who offered stock ratings for Myovant Sciences in the last three months forecast the average price in 12 months at $32.00 with a high forecast of $42.00 and a low forecast of $30.00. The average price target represents an 18.30% increase from the last price of $27.05. From those six equity analysts, five rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

Several other analysts have also recently commented on the stock. JP Morgan raised the target price to $38 from $30. Baird upped the stock price forecast to $30 from $24 and gave an “outperform” rating on the stock. SVB Leerink increased the price objective to $30 from $28. ValuEngine upgraded to a “buy” rating from a “hold”. Zacks Investment Research lowered to a “sell” rating from a “hold”.

We think it is good to buy at the current level and target $42 as 100-day Moving Average, and 100-200-day MACD Oscillator signals a strong buying opportunity.

Major Averages Hit More Record Highs

Quick Update

As a quick update to kick off today’s newsletter, I would like to summarize my correct calls and what I profited on since beginning to publish these updates. While nobody can predict the future, the major calls I am most proud of since producing these letters are 1) adding emerging market exposure and 2) hedging or selling the U.S. Dollar.

Emerging markets have been some of the best performers in 2020, and I have made some bullish calls on specific regional markets for 2021 as well. I have been touting emerging markets since my first report, but when I switched my focus to specific regions, my calls became even more correct. On December 3rd, I called Taiwan ( EWT ETF) the best bet for emerging market exposure while avoiding the risks and baked in profits of China. Since then, the EWT ETF which tracks Taiwan has gained over 4.3% while the MCHI ETF which tracks China has fallen over 3.3%. The Taiwan ETF has also outperformed the SPY S&P 500 ETF and the IEUR ETF which tracks Europe.

My calls on the U.S. dollar were also correct. Since I started doing these newsletters about a month and a half ago, I consistently reiterated that the dollar should be hedged or avoided because of the Fed’s policies, effect of interest rates this low for this long, government stimulus, strengthening of emerging markets, and inflation. I also said that any minor rally the dollar would experience would be fool’s good. In the last month and a half, the dollar has fallen around 2.3%, and since it briefly pierced the 91-level on December 9th , it has fallen another 1%.

Markets kicked off the final week of 2020 with a surge towards record highs after President Trump finally signed off on the stimulus bill.

News Recap

  • All major indices closed at record highs. The Dow Jones rose 204.10 points higher, or 0.7%, to close at 30,403.97. The S&P 500 climbed 0.9% to 3,735.36, and the Nasdaq rose 0.7% to 12,899.42. Meanwhile, the small-cap Russell 2000 underperformed and declined 0.38%.
  • After President Trump called the $900 billion stimulus package an unsuitable “disgrace,” and alluded to possibly vetoing the bill, over the weekend the president signed the bill into law . By signing off, a government shutdown was averted while unemployment benefits were extended to millions of Americans.
  • After President Trump demanded stimulus checks for Americans to be raised from $600 to $2,000 each , the Democrat-led House voted for this measure on Monday (Dec. 28). The ball is now in the GOP-led Senate’s court on the measure. They are not expected to approve the measure.
  • Apple led the Dow higher, and gained 3.6%. Disney also climbed nearly 3%.
  • Communication services, consumer discretionary and tech were the best performing sectors in the S&P 500, with each rising over 1%.
  • Amidst fears of a COVID-19 “surge on top of a surge” after the Christmas holiday, over one million people in the U.S. have now been vaccinated. Meanwhile, the U.S. has averaged at least 184,000 new infections per day.

Markets cheered President Trump’s signing of the stimulus package and are further encouraged by the possibility of larger stimulus checks. After the market traded flat last week, it kicked off the final week of 2020 with a bang. Although it is still very possible that consolidation, profit taking, and rebalancing could happen in this shortened week, the general focus of both investors and analysts has appeared to be the long-term potential of 2021.

As Tom Essaye, founder of The Sevens Report said :

“The five pillars of the rally (Federal stimulus, FOMC stimulus, vaccine rollout, divided government and no double dip recession) remain largely in place, and until that changes, the medium and longer-term outlook for stocks will be positive.”

While I still do believe that there will be a short-term tug of war between good news and bad news, I am now convinced that these moves are manic and based on sentiment. There has not been a pullback to end the year as I anticipated. But I still do believe that markets have overheated, and that between now and the end of Q1 2020 a correction could happen.

There is optimistic potential, but the road towards normalcy will hit inevitable speed bumps.

I do believe though that a correction is healthy and could be a good thing. Corrections happen way more often than people realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017). I believe we are overdue for one since there has not been one since the lows of March. This is healthy market behavior and could be a very good buying opportunity for what I believe will be a great second half of the year.

The mid-term and long-term optimism are very real, despite the near-term risks. The passage of the stimulus package only solidifies the robust vaccine-induced tailwinds entering 2021.

The general consensus is that 2021 could be a strong year for stocks, despite short-term headwinds. According to a new CNBC survey which polled more than 100 chief investment officers and portfolio managers, two-thirds of respondents said the Dow Jones will most likely finish 2021 at 35,000 – a roughly 16% gain from Thursday’s close of 30,199.87. Five percent also said that the index could climb to 40,000 by the end of 2021.

Therefore, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and Q1 2021 is very possible. But I do not believe, with conviction, that a correction above ~20% leading to a bear market will happen.

Will the Dow Approach 31,000 or 29,000 Before Mid-2021?

Figure 1 – Dow Jones Industrial Average ($INDU)

After trading as low as around 29,650 at one point last Monday (Dec. 21), the Dow has been firmly back above 30,000 for the last week. The blue-chip index also closed at yet another record high on Monday (Dec. 28).

I do think that the Dow has some more room to run in the next few days to close off the year. Trump’s signing of the stimulus bill was a belated Christmas gift for investors everywhere. If the Senate approves $2,000 stimulus checks, then another short-term pop can certainly happen.

My short-term questions though still remain as to whether or not the Dow can not only stay above 30,000 for more than a week at a time but also hit more all-time highs before March. The volume has also been very unstable as of late, but that is likely due to shortened trading weeks to close off the year.

In the short-term, I believe it is just as likely for the Dow to approach 29,000 as it is to approach 31,000 in the early months of 2021.

While I think a 35,000 call to close out 2021 is a bit aggressive, I do believe that the second half of 2021 could show robust gains for the index.

With so much uncertainty and the RSI still firmly in hold territory, the call on the Dow stays a HOLD.

This is a very challenging time to make calls with conviction. But one thing I do believe is that if and when there is a drop in the index, it will not be strong and sharp relative to the gains since March, let alone November. I believe that more likely than not we will be in a sideways holding pattern until vaccines are available to the general public by mid-2021.

For an ETF that attempts to directly correlate with the performance of the Dow, the SPDR Dow Jones ETF (DIA) is a strong 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 Update – AstraZeneca/Oxford Uni Vaccine Approval Imminent

The Latest

Over the weekend, news hit the wires that the UK will begin to roll out the AstraZeneca/Oxford University vaccine from Monday. With access to both the BioNTech/Pfizer Inc. and AstraZeneca/Oxford University vaccines, the UK government intends to vaccinate 2 million people within the next 2-weeks.

The news, published by the Telegraph, also stated that India also plans to approve the vaccine by next week.

In the UK, a total of 616,933 people reportedly received the vaccine between 8th and 20th December. The government has ordered 40 million doses of the BioNTech/Pfizer Inc. vaccine and 100 million AstraZeneca doses.

The news hit the wires following the Malaysian government’s increased order. Last week the Malaysian government announced that it placed a 6.4m dose order with AstraZeneca. In addition, the Malaysian government was also negotiating with both China and Russia to obtain further doses.

Malaysia is currently battling a third wave of the COVID-19 pandemic. The identification of more virulent strains of the virus has led to governments ramping up vaccination orders.

Combined with a 12.8m dose order from BioNTech/Pfizer Inc., the government has secured enough doses to vaccinate 40% of the Malaysian population.

The Malaysian government expects to have sufficient doses to vaccinate 83% of the population once vaccine orders have been placed with China and Russia.

What’s next?

As governments ramp up vaccine doses, expectations are for economies to begin reopening once the “most-at-risk” have been vaccinated.

Across the EU, the UK, and the U.S this could happen before the end of January. Timelines remain key to forecasting any economic recovery.

The markets will be anticipating combined fiscal and monetary policy measures to kick start economic recoveries.

Some nations will lag the developed nations, however. Poorer nations will have less access to COVID-19 vaccines, while other nations were late in placing orders.

We can therefore expect some economic divergence that will not only impact the bourses but also the respective currencies.

The game-changer, from a vaccine perspective, remains a single-dose vaccine. To date, Johnson & Johnson is out in front in the running to deliver a single-dose vaccine. Clinical trial results are expected to be available by the end of January. If the vaccine proves to be effective and safe, Johnson & Johnson would then submit a EUA to the FDA in February. Submissions to other health regulators would be made in parallel, according to the Johnson & Johnson website.

The Latest COVID-19 Numbers

At the time of writing, the total number of confirmed COVID-19 cases stood at 80,728,962. The total number of U.S cases has risen to 19,433,847, with the total number of related deaths rising to 339,921.

Behind the U.S, India saw the total number of cases rise to 10,188,392, with Brazil reporting 7,465,806 cases in total.

For France, Germany, Italy, and Spain, the total number of cases stood at 8,102,402, with 214,174 related deaths.

Across the United Kingdom, the total number of cases stood at 2,256,005, with 70,405 related deaths.

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.

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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.

 

COVID-19 Update – The EU Commission Authorizes the Comirnaty Vaccine

The Latest

On Monday, the EU’s European Medicines Agency (“EMA”) recommended the authorization of the BioNTech/Pfizer Inc. vaccine.

An assessment report, with details of the EMA’s evaluation of Comirnaty, and the full risk management plan is due out in the coming days.

According to the EMA report, the recommendation was given for the following reasons:

  • Comirnaty offers a high level of protection against COVID-19.
  • The main trial showed that the vaccine has a 95% efficacy.
  • Most side effects are mild to moderate in severity and are gone within a few days.

The EMA decided that the Comirnaty benefits outweighed the risks, allowing the recommendation for authorization.

Based on the recommendation, BioNTech/Pfizer Inc. will need to provide additional trial results. Clinical trials are to last for 2-years. One key unknown is the immunization period.

Following the EMA approval, the EU Commission approved the use of the vaccine for 16-year-olds and older.

The European Centre of Disease Prevention and Control welcomed the authorization.

The ECDC website stated that the vaccines will first reach those that are in most need of protection.

National authorities have defined and identified priority groups for vaccination. These include healthcare workers, the elderly, and the vulnerable.

What’s next?

Last week, both France and Germany had announced that vaccinations would begin before the end of the year. The news had come following the EMA’s decision to bring forward its review of the Comirnaty vaccine.

In the coming days, the markets will be looking for more details on the number of vaccine doses that will be made available to the EU. Also of interest will be how the EU Commission plans to allocate the vaccine doses.

Some EU member states are more adversely impacted by the COVID-19 vaccine than others.

Following news of the new strain of the coronavirus in the UK, there will be a greater sense of urgency to vaccinate high-risk groups sooner rather than later.

Before Monday’s authorization, the EU had pre-ordered 200 million BioNTech/Pfizer Inc. doses, with the option to purchase an additional 100 million doses in 2021.

AstraZeneca and Sputnik V

In addition, the EU also pre-ordered 400 million AstraZeneca doses.

A total of 700 million doses are sufficient to vaccinate 350 million EU citizens, That’s equivalent to 78% of the total population.

An additional 200 million doses would cover the shortfall, assuming that the EMA and EU Commission authorize the AstraZeneca vaccine.

The UK government expects independent regulator MHRA to authorize the AstraZeneca vaccine before the end of the year.

For the EU and beyond, the UK’s approval of the AstraZeneca vaccine will deliver a much-needed confidence boost.

Some of the most adversely affected countries, including India and Brazil, have only pre-ordered AstraZeneca doses.

With the number of new COVID-19 cases continuing to rise, pharmas are going to need to deliver more options. The more virulent strain identified in the UK has added more pressure on pharmas as new cases continue to spike.

Russia’s Sputnik V vaccine has become a viable alternative for some countries. This week, news hit the wires of India and Russia agreeing to jointly mass-produce the vaccine to deliver globally. Considering the spike in new COVID-19 cases across India and the delay to the AstraZeneca vaccine, the Sputnik V vaccine is critical. For poorer nations, both the Pfizer Inc. and Moderna Inc. vaccines are too expensive for mass vaccinations.

The Latest COVID-19 Numbers

At the time of writing, the total number of confirmed COVID-19 cases stood at 77,687,608. The total number of U.S cases has risen to 18,455,554, with the total number of related deaths rising to 326,679.

Behind the U.S, India saw the total number of cases break through the 10m level this week. Brazil has reported 7,264,221 cases in total.

For France, Germany, Italy, and Spain, the combined number of cases stood at 7,807,431, with 206,671 related deaths.

Across the United Kingdom, the total number of cases stood at 2,073,511, with 67,616 related deaths.

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.

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.

Dow, S&P Dip Again on Lockdown Fears

Stocks closed largely down on Monday (Dec. 14) as fears of stricter lockdowns outweighed vaccine optimism.

News Recap

  • The Dow Jones closed lower by 185 points, or 0.5% after earlier rising by as much as 200 points and hitting a record intraday high. The S&P 500 also declined by 0.4%, while the Nasdaq outperformed and gained 0.5%. The small-cap Russell 2000 once again rose, gaining 0.26%.
  • Although the day started with optimism as Pfizer began the rollout of its vaccine, comments from New York City Mayor Bill De Blasio put pressure on the Dow and S&P, and spooked investors about further lockdowns. De Blasio warned earlier in the day that New York could experience a “full shutdown” soon, due to infection levels not seen since May.
  • There is some cautious optimism that some sort of stimulus could be passed before the end of the year, however, congress remains deeply divided on several fronts. Namely, these partisan divides stem from liability protections for businesses, the scope of state and local aid, and weekly unemployment benefits.
  • We have reached the deadliest weeks of the COVID-19 pandemic. More than 300,000 total COVID-related deaths have now been confirmed in the U.S., with over 16 million confirmed cases.
  • After the U.S. FDA. officially cleared Pfizer (PFE) and BioNTech’s (BNTX) vaccine last Friday (Dec. 11), the roll-out officially began on Monday (Dec. 14). The first doses were administered to healthcare workers and nursing home staffers. Approximately 2.9 million doses were shipped to 636 sites across the country. Pfizer also said it would roll out a second batch of 2.9 million doses shortly after this initial batch. The FDA is also slated to publish its assessment on Moderna’s vaccine this week, before mass deployment.
  • Despite the start of the vaccine roll-out, shares of Pfizer and BioNTech both sharply fell 4.65 and 14.95%, respectively.
  • Companies dependent on an economic reopening lagged the “stay-at-home” and tech winners from early on in the pandemic. United Airlines (UAL) dropped 3.4% and Chevron (CVX) fell 3.26% compared to Netflix (NFLX) which gained over 3.8%, and Amazon (AMZN) which popped more than 1%.
  • Tesla (TSLA) also surged 4.90% as investors anticipate its inclusion into the S&P 500 after this week.

While the short-term may see some pain and/or mixed sentiment, the mid-term and long-term optimism is certainly very real. Overall, the general consensus between market strategists is to look past short-term painful realities and focus 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.

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.”

Other Wall Street strategists are bullish about 2021 as well. According to a JPMorgan note to clients released on Wednesday (Dec. 9), a widely available vaccine will lift stocks to new highs in 2021:

“Equities are facing one of the best backdrops for sustained gains next year,” JPMorgan said. “We expect markets to be driven by recovery from the COVID-19 crisis at the back of highly effective vaccines and continued extraordinary monetary and fiscal support.”

JPMorgan’s S&P 500 target for 2021 is 4,400. This implies a nearly 20% gain.

On the other hand, for the rest of 2020, and maybe early on into 2021, markets will wrestle with the negative reality on the ground and optimism for an economic rebound.

Additionally, the rally since election week invokes concerns of overheating with bad fundamentals. Commerce Street Capital CEO Dory Wiley advised caution in this overheated market. He pointed to 90% of stocks on the NYSE trading above their 200-day moving average as an indication that valuations might be stretched:

“Timing the market is not always well-advised and paring back can miss out on some gains the next two months, but after such good returns in clearly a terrible fundamentals year, I think taking some profits and moving to cash, not bonds, makes some sense here,” he said.

In the short-term, there will be some optimistic and pessimistic days. Some days, like Monday (Dec. 14), will reflect what the broader “pandemic” trend has been – cyclical and recovery stocks lagging, and tech and “stay-at-home” stocks leading. On other days (and in my opinion this will be most trading days), markets will trade largely mixed, sideways, and reflect the uncertainty. However, if a stimulus deal passes before the end of the year, it could mean very good things for short-term market gains. It is possible that there could be a minor compromise reached before the end of the year, however, a more large-scale comprehensive package may not be agreed to until 2021.

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, it is truly hard to say with conviction 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.

On Pessimistic Days, Tech is Crucial…But There are Concerns

Tech shares led the markets on Monday (Dec. 14) and reflected a return of the “stay-at-home” trade – possibly due to Mayor De Blasio’s “shut down” comments about New York City. However, I believe these are short-term moves rather than a return of long-term trends. I do not believe there is “market nostalgia” for the way the indices traded largely from April through the end of October.

Although I believe tech exposure is important during pessimistic trading days, I 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) are inevitably coming in the short-term and would make me feel far more confident about initiating tech positions at lower valuations for the long-term.

After exceeding an overbought RSI level of 70, the pullback last Wednesday (Dec. 9th) brought it back down to a healthier level. While its current RSI of 63.30 is still pretty high, it is not quite overbought and still a hold. But monitor this . If the index goes on another bull-run and exceeds 70, then you may want to consider selling some. While an overbought RSI does not automatically mean a trend reversal, it does not help the overvaluation of the market and possible correction. The NASDAQ’s pullback last Wednesday (Dec. 9), after it exceeded a 70 RSI, reflects that.

The decline in volume since the start of the month is also quite concerning for volatility purposes. 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, like Monday (Dec. 14), having NASDAQ exposure is crucial because of all the “stay-at-home” stocks that trade on the index. However, positive vaccine news always induces the risk of downward pressure on tech names – both on and off the NASDAQ. But 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. A further correction would not shock me in the least. But again, there is so much unpredictability right now, and truly anything could happen. The one thing I can confidently say though, is that if the RSI exceeds 70 again, then you should consider selling. 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 an excellent 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.

 

Markets End Week (Dec. 11) in the Red, Uncertain Short-term Sentiment

What Happened Last Week:

  • Markets throughout the week continued wrestling with short-term pain and long-term optimism.
  • After fresh record highs were reached the week before, the major indices ended the week lower due to a multitude of headwinds. Between Monday December 7th and Friday’s close December 11th, the Dow closed down 0.08%, the S&P closed down 0.77%, and the NASDAQ closed down -1.13%. The small-cap Russell 2000, however, notched another weekly gain, and closed up about 1.00%.
  • Sentiment is mixed, and the rally since election week invokes concerns of overheating, with bad fundamentals. Commerce Street Capital CEO, Dory Wiley , advised caution. He pointed to 90% of stocks on the NYSE trading above their 200-day moving average as an indication that valuations might be stretched. “Timing the market is not always well-advised and paring back can miss out on some gains the next two months, but after such good returns in clearly a terrible fundamentals year, I think taking some profits and moving to cash, not bonds, makes some sense here,” he said.
  • Judging by the jobless claims report which came in on Thursday (Dec. 10), the jobs recovery appears to have stalled. Weekly jobless claims increased by 853,000 last week versus the estimate of 730,000, representing a sharp increase from the 716,000 figure a week ago. This was also the highest number since September 19.
  • Although the Senate unanimously passed a temporary spending bill to avoid a government shutdown and buy more time to negotiate a stimulus package before the end of the year, stimulus negotiations between Republicans and Democrats continue to drag-on and weigh on sentiment.
  • The week before brought some initial signs of stimulus progress, however, Democrats and Republicans still have some critical differences. Much of the division stems from liability protections for businesses, the scope of state and local aid, and weekly unemployment benefits.
  • It is possible that there could be a minor compromise reached before the end of the year, but a larger-scale comprehensive package may not be agreed upon until 2021. The longer these talks continue, the stronger the headwinds will be for stocks, and the more damaging it will be for the U.S. economy.
  • DoorDash (DASH) and AirBnB (ABNB) both made their public debuts last week to much fanfare. Airbnb spiked 115% when it began trading publicly for the first time on Thursday (Dec. 10) while DoorDash closed 86% higher in its Wednesday debut (Dec. 9). However, according to Paul Schatz , president and chief investment officer of Heritage Capital, these debut rallies may indicate that the IPO market is getting ahead of itself, and invoke fears of “euphoria and greed” last seen in the market during the dot-com bubble.
  • The pandemic continues exceeding the previous records. After hitting 3,000 deaths a day for several days last week, Friday’s (Dec. 11) tallies, according to NBC News , showed 2,890 deaths and 226,024 new cases.
  • In the last week the U.S. has averaged 211,324 cases and 2,381 deaths per day, which is quite an increase from 168,493 cases and 1,419 deaths four weeks ago.
  • Not all is bad, though. The vaccine(s) remain a positive tailwind. After the U.K. became the first country in the world to approve the usage of Pfizer and BioNTech’s vaccine the week before, the U.S. F.D.A. ended the week by officially clearing the vaccine for emergency use. Millions of doses are expected to be shipped right away.
  • Since the vaccine was first announced on November 9, a broadening of the market’s rally began, largely led by small-cap stocks, and cyclical value stocks dependent on an economic recovery.
  • Consumer sentiment posted a surprising increase in December due to vaccine optimism. Although the economic recovery may stutter in the near term, a vaccine changes everything for 2021’s outlook. Corporate profits, for example, are forecast to grow more than 20% in 2021 .
  • According to Robert Dye, Comerica Bank Chief Economist , he is: “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.”
  • According to a JPMorgan note to clients released on Wednesday (Dec. 9), a widely available vaccine will lift stocks to new highs in 2021: “Equities are facing one of the best backdrops for sustained gains next year…We expect markets to be driven by recovery from the COVID-19 crisis at the back of highly effective vaccines and continued extraordinary monetary and fiscal support.”
  • JPMorgan’s S&P 500 target for 2021 is 4,400. This implies a nearly 20% gain from where the index closed on Wednesday (Dec. 9).

In the short-term, there will be some optimistic days and pessimistic days. Other days, and in my opinion, which will be most trading days, markets will trade largely mixed, sideways, and reflect the uncertainty. However, if a stimulus deal passes before the end of the year, it could mean very good things for short-term market gains. It is possible that there could be a minor compromise reached before the end of the year, however, a more large-scale comprehensive package may not be agreed to until 2021.

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, it is truly hard to say with conviction 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.

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.