Does the Coronavirus Vaccine News Change the Stock Market Environment?

Dear Reader,

This week a news on coronavirus vaccine developed by Pfizer and BioNTech seemed to change the near term stock market environment .

Investors sold stay-at-home winners stocks like Zoom Video, Peloton Interactive, Docusign Inc etc. and bought into value stocks like oil production and exploration stocks, commodities producers, industrials and financials.

Is the change in the stock market temporary or permanent? 

I think it is permanent, if the virus does not mutate or the vaccine fails. Yes, Zoom Video, Peloton and Docusign will be worth much less soon. However, if the coronavirus mutates or the vaccine proves ineffective the aforementioned stocks will experience a resurgence.

For the moment, the digital transformation is still going. However, the coronavirus vaccine news definitely slowed the pace of digital transformation. I still see Facebook challengers as Snap, Snapchat application maker, and Pinterest benefiting. The new social interaction is now done in front of the personal computer, the tablet or the smartphone. So social applications like Facebook, Snapchat, produced by Snap Inc, and Pinterest and the stocks of their parent companies will continue to benefit.

Usually, investing in biotechnology stocks is a binary event. You either win a lot or you loose a lot, depending on the approval by the United States Food and Drug Administration agency and later success of the medication. The current stock market situation is vey similar to a binary event. If a coronavirus vaccine is developed and the coronavirus does not mutate, oil and other commodities producers, industrials and financial stocks will rise a lot along with improvement in the economy. Technology stocks will benefit in both situations actually. Technology stocks are a leveraged play on the economy since they require very little capital to be operational, to start off. A coronavirus mutation along with a new economic recession will speed up digital transformation and technology stocks like Zoom Video, Peloton, Docusign etc. in particular, will again benefit. Most other technology stocks will also benefit. If the coronavirus vaccine proves effective, the economy will burst into fast, be it temporary, growth and technology stocks will again benefit.

All said, we are in the fourth industrial revolution of artificial intelligence and technology stocks seem to be winners in almost all possible situations. However, if artificial intelligence does not rise to the occasion and disappoints the very high expectations the world has for it the Nasdaq composite and most technology stocks can fall more than 60 %.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich