What impact will a coronavirus vaccine have on financial markets?
- Not only would a vaccine re-energise equity demand for sectors hard hit by Covid-19, but it could also divert funds back to the US, although Asia will remain attractive
- The implications for Treasuries and currencies are more open to question
From an equity perspective, independent investment research provider TS Lombard has likened the effect of the pandemic, to date, on corporate earnings as being akin to what might be expected in a regular recession, with eventual recovery being a measured affair.
But the roll-out of an effective vaccine would make the pandemic-related hit to global corporate earnings more like “a natural disaster”, wrote Andrea Cicione, head of strategy at TS Lombard, and Steve Blitz, TS Lombard’s chief US economist, on November 10, with the large shock to economic activity being followed by a swift recovery.
Optimism around a vaccine might well translate into stronger consumer confidence and generate sectoral rotation. Investor demand for equity market sectors that have been hard hit by Covid-19 would be re-energised.
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