There’s no doubt that Covid-19 has had a huge impact on the world’s financial markets, breathing new life into some stocks (such as Zoom) while precipitating a sharp decline for others (like Apple and Boeing Co.).
The forex market has also been heavily impacted, particularly as governments have introduced quantitative easing measures and slashed their base interest rates as a way of regulating their ailing economies.
Interestingly, the rollout of a global vaccine will also affect the financial markets in the coming months. We’ll explore this below while asking how assets have reacted to the initial vaccine-related announcements.
How the Vaccine Brought Relief to the Financial Markets
According to the forex brokers Tickmill, the coronavirus is expected to cost the global economy $1.1 trillion by the end of 2020.
It’s also expected that global growth will fall to less than 2% this year, although most economists are predicting a robust rebound in 2021.
As a result of this, it should come as no surprise that most markets reacted well to the news of a vaccine breakthrough, with the announcement that Pfizer and BioNTech’s clinical trials had revealed 90% efficacy rates.
The FTSE 100 soared to 6,186 points (up by 276 points and 4.7%) within 24 hours of the announcement, for example, while adding more than £70 billion to the value of its blue-chip index.
This represented the FTSE’s biggest one-day gain since March, and its highest closing point since August 12th and prior to sustained fear of a second coronavirus wave.
On Wall Street, the S&P 500 index jumped to a record high of 3,645.99 points, before retreating slightly to close with a 1.17% gain. The Dow Jones industrial average also hit new heights before dropping back, although the Nasdaq ended the day 1.5% as several large-cap tech stocks became the subject of widespread sell-offs.
What Does This Tell us About the Market Impact?
The respective performance of these indexes is telling, as we’ve seen a sudden and swift resurgence amongst stocks that were the most adversely impacted by the coronavirus of late.
Conversely, tech stocks that boomed directly as a result of the pandemic and subsequent lockdown measures (such as Netflix and the aforementioned Zoom) have endured an overdue correction and fallen to pre-pandemic levels.
In this respect, the market recovery is mirroring the fallout from a natural disaster rather than a traditional economic recession, with a large shock to sentiment and asset values being followed by a fast and pronounced recovery.
On a similar note, it’s hard to argue with the idea that the optimism around a vaccine and its delivery will translate into a sudden boom in consumer confidence, creating increased spending and significant sectoral rotation.
Investor demand for equity market sectors is certainly poised to boom in the near-term, with the assets that have been hardest hit by the coronavirus set to be re-energised.