COVID | Equities | Europe | UK | US
COVID vaccine rollout has begun. The Pfizer / BioNTech vaccine is now approved for use in the US, UK and several other countries and the most vulnerable individuals are already receiving the first dose. Several other vaccines have also announced successful trials. I review how the twelve subsectors we identified as likely to benefit from a vaccine have fared relative to the broader S&P index.
The subsectors identified in the piece are shown in Table 1. The share prices of these sectors were highly responsive to three COVID-related ‘bounce’ events (26 Feb, 17 Apr and 9 Nov), providing an indication that future performance would likely be linked to vaccine news. On average, the twelve subsectors increased 15% on the day the Pfizer announcement (9 Nov), 14pp more than the composite S&P 1500 index.
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COVID vaccine rollout has begun. The Pfizer / BioNTech vaccine is now approved for use in the US, UK and several other countries and the most vulnerable individuals are already receiving the first dose. Several other vaccines have also announced successful trials. I review how the twelve subsectors we identified as likely to benefit from a vaccine have fared relative to the broader S&P index.
The subsectors identified in the piece are shown in Table 1. The share prices of these sectors were highly responsive to three COVID-related ‘bounce’ events (26 Feb, 17 Apr and 9 Nov), providing an indication that future performance would likely be linked to vaccine news. On average, the twelve subsectors increased 15% on the day the Pfizer announcement (9 Nov), 14pp more than the composite S&P 1500 index.
Since 9 November, there has been a lot of COVID-19 news (Chart 1). On 20 Nov, Pfizer and BioNTech submitted an emergency use authorisation (EUA) request to the US, leading to an uptick in share prices. Around Thanksgiving (26 Nov) , there were fears that higher mobility would translate into more US deaths in the short-term. This had negative price implications that were subsequently reversed once Moderna filed for an EUA on 30 Nov.
Across the twelve subsectors, the average share price rose 13% over the last month. All but two sectors (Health Care REITs and Restaurants) have outperformed the broader S&P. There were strong performances by firms in Oil & Gas Drilling and Hotel & Resort REITs sectors. Within them, average share prices rose 54% and 13% respectively since 9 Nov. Furthermore, none of the sectors have recorded a drop in share price over the period.
Companies within the Oil & Gas and Casinos & Gaming sectors have shown strong momentum. REITs and HR & Employments services sector firms, on the other hand, experienced much of their gain in the first half of November.
Bottom Line
The results confirm that firms in ten of the twelve identified subsectors have generally benefited from positive vaccine-related news over the last month, despite not having any first-order links to them. In fact, the Pharma industry has not outperformed the composite S&P index (Chart 2). This may reflect a number of factors; (i) an unwinding of positions away from Pharma in risk-on environment; (ii) the measure aggregates across a number of Pharma firms not involved in the vaccine development; (iii) some vaccine firms are not set to generate significant profits from the rollout.
A list of firms within the respective sectors can be found in Table 2.
Sam van de Schootbrugge is a macro research economist taking a one year industrial break from his Ph.D. in Economics. He has 2 years of experience working in government and has an MPhil degree in Economic Research from the University of Cambridge. His research expertise are in international finance, macroeconomics and fiscal policy.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)