Goldman Sachs says approval of the Covid-19 vaccine could turn markets upside down. Bloomberg Report
The increase in the likelihood of a vaccine approved by the end of November is underestimated by stock markets, strategists including Kamakshya Trivedi wrote in a statement on Wednesday. In the coming months, the aftermath of the US elections and the evolution of the virus – in part with the reopening of schools – will also likely be key market drivers, they said.
Approval of a vaccine could "challenge market assumptions about both cyclicality and eternally negative real rates," the team wrote, adding that such a scenario could support steeper yield curves, traditional cyclicals and banks, challenging at the same time the leadership of technology stocks.
If this happens in conjunction with a change in the US administration, emerging market equities could benefit "if trade policy risks diminish while US fiscal risks rise," according to the note.
While strategists have suggested it may be too early for investors to aggressively position themselves for such a shift, they have recommended options trading. For example, some call options on the S&P 500 still look attractive, and Goldman sees the bullish level of around 3,700 if there was an "early" vaccine.
This compares with a potential downside target of 2,200 should there be a significant reversal of activity from a second wave of the virus, strategists added.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/vaccino-coronavirus-mercati/ on Sat, 08 Aug 2020 05:31:52 +0000.