- On Monday, Pfizer and BioNTech announced their coronavirus vaccine was 90% effective.
- On Tuesday, European regulators came down hard on Amazon.
- On Wednesday, Goldman Sachs laid out its top 10 investment themes for 2021.
- And on Thursday, the International Energy Agency (IEA) cut its forecast for global oil demand.
✍️ Connecting The Dots
The world cheered on Pfizer and BioNTech last week, as they became the first drugmakers to release successful data from a large-scale clinical trial of their coronavirus vaccine. With an end to the health crisis and those pesky lockdowns in sight, global stock markets shot up on the news. That extended the gains stock markets were already showing on the back of a Joe Biden US presidency, which investors are expecting to improve trade relations and boost the global economy. Mixed together, the two scenarios were a recipe for success: global stock markets reached new all-time highs on Monday.
But then reality set in. While a vaccine should lead to that all-important herd immunity – allowing folks to get out and drive economic recoveries the world over – there’s still a long COVIDy winter ahead. An increasing number of lockdowns, vaccine setbacks, and virus mutations could all delay the expected global economic recovery. Just look at the UK’s latest economic update: the country’s economy is still almost 10% smaller than it was before the pandemic, while new lockdown measures could push the country back into recession. Likewise, the oil industry was brought back down to earth on Thursday, when the International Energy Agency declared that oil demand wouldn’t rise in any significant way till late 2021. So while there is light at the end of the tunnel, it might be a rocky path to get there.
To top things off, regulators in Europe and China both came out with news that rocked stock markets. Europe’s have concluded that Amazon is in breach of anti-competition rules, and they launched a second investigation into the ecommerce giant. If it’s found guilty, Amazon could be forced to change its business practices in the region, as well as pay a fine of 10% of its annual global revenue – a hefty $28 billion by last year’s number. China’s regulators are cracking down on Big Tech too: they published rules that should prevent the country’s internet platforms – like ecommerce giant Alibaba – from abusing their market-leading positions.
1. Investors are getting in touch with their sensitive sides.
Global economic growth is now expected to recover in earnest next year, and that’s good news for investments that are sensitive to economic activity. Analysts, then, are expecting cyclical stocks – energy, financials and consumer discretionaries – to fare a lot better than defensive stocks like consumer staples, telecoms, and utilities.
2. Europe raised our hopes, only to dash them again.
Europe was weathering the coronavirus crisis better than expected until fairly recently, but then a resurgence of cases hit and its near-term growth outlook turned gloomy. Goldman Sachs is now expecting the bloc’s investments to underperform other regions, at least until there’s signs of a peak in COVID cases. The investment bank reckons you’re probably better off investing in emerging markets shares than European shares in the near term.
🎯 Also On Our Radar
The price of bitcoin has only been as high as it is now for twelve other days in its entire history. Cryptocurrency traders are putting that down to expectations for more support measures from the US Federal Reserve (the Fed), even as the government continues to sit by. The Fed’s decision to pump more money into the economy could cause the US dollar to lose value, making bitcoin an attractive alternative. It also looks like more companies are starting to warm to cryptocurrencies: PayPal announced it’d be adding cryptocurrency features last month, while the Chinese Construction Bank – one of China’s biggest – said it’s planning to sell a bond that can be bought with bitcoin.