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London (CNN Business)A return to the office, packed flights and full nightclubs may seem like a distant future. But Wall Street has a new message for its clients: It’s time to start thinking about life after the pandemic.
What’s happening: Many riskier assets skyrocketed on Monday after Pfizer (PFE) and BioNTech said early results indicate their vaccine candidate is more than 90% effective. That raised hopes that vaccines could help normal life resume in 2021, driving a huge rebound in economic activity.
“The strong results from the Pfizer vaccine were better than most expected and [mean] we could be opening back up sooner than expected,” said Ryan Detrick, LPL Financial’s chief market strategist.
The optimism is pushing asset managers to think about making big changes to their portfolios. Before long, they warn, stocks that perform well when people are stuck at home — say, Zoom (ZM) or Netflix (NFLX) — could fall out of favor, while airlines, hotels and ride-sharing companies may look like smarter picks.
“Investors need to diversify for the next leg, toward more cyclical parts of the market that have lagged behind in 2020, and away from Big Tech and the primary stay-at-home beneficiaries,” Mark Haefele, chief investment officer at UBS Global Wealth Management, told clients Tuesday.
He wasn’t the only one looking ahead.
“We need to shift our attention to those parts of the market that have been the most hammered because of Covid and away from the work-from-home stocks that have had such an incredible year,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. His view: “Covid is not forever.”
Investors on Monday seemed to agree.
- Airline stocks shot up. Delta (DAL) rallied 17%, while American Airlines (AAL) gained 15%.
- Disney (DIS) shares rose 12%, while stock in AMC Entertainment (AMC) soared 51%.
- SL Green Realty (SLG), which invests in office buildings in New York City, saw shares jump 37%.
- Meanwhile, Netflix lost almost 9%, while Zoom dropped 17%. Amazon (AMZN) shares fell 5%.
Of course, recovering from months and months of pandemic losses won’t be easy. Shares of AMC, for example, are still down 48% this year.
And there are still lots of unanswered questions about the vaccine timeline. The public is waiting on safety data from Pfizer, and the company said it’s not sure how long protection from the coronavirus will last. Even if numerous vaccines undergoing late-stage tests prove safe and effective, manufacturing and distributing billions of doses will be extremely difficult.
Plus, the next few months will remain challenging as coronavirus cases continue to rise around the world. For some companies, whatever benefits vaccinations bring may arrive too late. On Tuesday, budget carrier Norwegian Air said it was quickly running out of cash.
But investors are notorious for looking well into the future — and based on the Pfizer news, they like what they see. That may spell the end of the popular work-from-home trades that defined 2020.
Stockpiling couldn’t help Beyond Meat forever
Beyond Meat (BYND) was having a great year as people rushed to fill their freezers with plant-based patties and meatballs. But the initial wave of stockpiling is over, the company said Monday — revealing a tougher path ahead.
The latest: Between June and September, net revenues were roughly $94 million, an increase of just 2.7% year-over-year. The previous quarter, in the thick of the pandemic, net sales were more than $113 million, a 69% increase compared to 2019.
“Freezers were full across homes throughout the country,” CEO Ethan Brown said on a call with analysts.
The sales decline, which also was fed by weaker demand from restaurants, drove Beyond Meat to a surprise loss. Wall Street was banking on a profit.
Investor insight: Shares have plunged 20% in premarket trading. They already closed more than 4% lower on Monday after McDonald’s announced that it will begin testing a new “McPlant” burger. Investors initially feared this signaled the end of the McDonald’s-Beyond Meat partnership, but Beyond Meat later said it had co-created the plant-based patty.
Watch this space: Lockdowns are returning in Europe, but panic buying on levels seen last spring seems to have passed. Market research firm Kantar said Tuesday that there was “no significant spike in demand” for groceries in the United Kingdom despite announcements of new restrictions.
Some companies are still experiencing a stay-at-home bump, however. Late last month, Procter & Gamble (PG) raised its annual sales guidance as demand for cleaning products stayed strong.
The Covid economy needs stimulus no matter what
The coronavirus-ravaged economy just received a jolt of something it hasn’t experienced in months: hope. But while a vaccine could be a game changer, additional safety checks, manufacturing and distribution won’t happen overnight — and the US economy badly needs help now.
It’s crucial that politicians in Washington don’t get lulled into a false sense of complacency, or use vaccine progress as an excuse to put off or limit the next round of fiscal relief, my CNN Business colleague Matt Egan reports.
“Lawmakers have to complete the bridge they started building at the beginning of the pandemic to get us to the end of the pandemic when people will feel comfortable going to restaurants and ballgames,” said Mark Zandi, chief economist at Moody’s Analytics.
Failure to provide aid would risk lasting economic damage, with bankruptcies and business closures hindering a full recovery. Restaurants, hotels, concert halls and airlines continue to be crushed by the health crisis, and they can’t wait much longer for support.
“The vaccine is great. It makes everyone feel better,” Zandi said. “But at the end of the day, the pandemic is as bad as it’s ever been. We still have a lot of unemployed people, small businesses struggling to survive, airlines running on fumes.”
Corsair Gaming reports results before US markets open. Datadog (DDOG), Lyft (LYFT) and Tencent Music (TME) follow after the close.
Coming tomorrow: China’s “Singles Day” shopping event is a bellwether for the spending recovery in the world’s second largest economy.
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