The week ahead: Is the stay-at-home stocks rally over?

Markets have moved on from the US Presidential Election, turning their attention instead to the prospect of an effective COVID-19 vaccine.

This comes as pharmaceuticals giant Pfizer, in partnership with BioNtech, last week announced that its Phase 3 clinical studies had shown its COVID-19 vaccine to be 95% effective against the virus. Emergency Use Authorisation with the FDA is currently being sought by Pfizer.

In response to these and other vaccine developments, US-listed stay-at-home stocks, such as Zoom, Peloton and Netflix, have proven volatile in recent weeks, as the sustainability of their popularity and performance comes into question.

Australian markets have witnessed similar price moves, with the likes of CBA and Qantas running up hard in the last 30-days, on the positive implications of a vaccinated populace and a more open global economy. On the other hand, e-commerce plays, such as Redbubble and Temple & Webster, which achieved market darling status during the height of the pandemic, have been bid lower.

Market gyrations aside, the US continues to feel the full impact of the coronavirus, recording close to 200,000 new cases of the virus on November 20.

Despite the prospect of a vaccine boosting market confidence, one is left wondering how long investors can look through growing case numbers and their implied economic impact. With the US Election and Q3 reporting season now wrapped up, in the short-term, the market may again turn its attention to virus statistics.

On that front, investors will gain further clarity on the state of the US economy this week: Preliminary November PMI data, a key indicator of economic health across the manufacturing and service sectors, is due out Monday; while employment data is due out Thursday.

Further out, off the back of rising COVID-19 cases, JP Morgan economists recently argued that:

‘This winter will be grim, and we believe the economy will contract again in 1Q.’

The investment bank expects Q4 GDP growth to hit 2.8%, before contracting 1% in the first quarter of 2021.


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