Vaccine breakthroughs set off investor rush for cyclical stocks

The prospect of three viable Covid-19 vaccines has caused a reshuffle this month in Wall Street’s blue-chip S&P 500 stock index, as investors moved out of tech stocks into sectors that they expect to benefit most from a quicker end to the health and economic crisis.

Equity investors took the positive trial results from Pfizer and BioNTech, followed by Moderna and others as a sign that a return to normal economic activity could be coming. Energy stocks, laid low as a result of the pandemic hit to oil demand, made the strongest rebound, followed by financial companies, whose fortunes are strongly linked to economic growth.

The gains came despite a surge in coronavirus infections and fresh lockdowns across the globe that pose a threat to the economic recovery achieved in recent months.

“No one expects the European winter to be smooth,” said Sunil Krishnan, head of multi-asset funds at Aviva Investors. “The prospects of a vaccine rollout offer the hope that it’s a temporary headwind rather than existential threat”.

Earlier this month, Pfizer and its partner BioNTech announced that their inoculation had achieved a more than 90 per cent efficacy rate in a late-stage trial. Moderna found its vaccine was 94.5 per cent effective, a rate that Pfizer/BioNTech then matched. Last week, Oxford university and AstraZeneca said their vaccine — which they have agreed to sell at cost to developing nations in perpetuity — had an average efficacy of 70 per cent.

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Technology stocks, which have surged this year as the pandemic reshaped economies around working and consuming from home, have not quite kept up with so-called “old economy” sectors during November. But they have still made gains.

“There will be winners and losers out of the vaccine race and market sentiment is positively focusing on the winners at this moment,” said Matthias Scheiber, global head of portfolio management at Wells FargoAsset Management.