Moderna news gives rally a shot in the arm

Chris Beauchamp IG

Heading into the close the FTSE 100 is 110 points higher, enjoying solid gains thanks to more vaccine news.

Stock rally energised by Moderna news
Dow touches 30,000 once again
Can vaccine news make up for the lack of fiscal stimulus?

Another day, another vaccine with promising results. Like buses, good news on the Covid front appears to be coming all at once, or at least with respect to vaccines. The virus itself continues to wreak havoc, but the market is continuing to look past all this towards a time when nations are engaged in widespread vaccination programmes. While the bounce today on the Moderna news isn’t anything like what we saw last week, there is still plenty of positivity, and with equity inflows picking up as well it looks like the bullish November momentum in equity markets still has plenty of room to run. Again, like last week, value has outperformed growth, with the Nasdaq’s paltry gains easily outdone, and for those lucky enough to have picked the (apparent) low in many ‘reopening’ stocks it seems more gains are on the way. Once again the Dow has shied away from smashing through 30,000, touching and then retreating from this level for the second Monday in a row, but it seems a matter of when, not if, the index will finally breach this latest impressive round number.

A key question for now is whether stock markets can maintain their exuberance if a vaccine means that the prospects of fiscal stimulus have diminished. It will probably be a harder task to get a deal done, but as we have known for a while (and has been repeated ad nauseam over the last week) the vaccine news is just a beginning. There is a way to go until production and, more importantly, distribution, are in full swing, and in this case a fiscal package is still needed. But the problem is that with the US election result essentially frozen thanks to Trump’s intransigence we could be waiting for a deal for quite a while as well. Investors will have to hope that the vaccine news has enough momentum to carry us to the end of the year, or at least until the festive ‘Santa rally’ arrives.

Author

Chris Beauchamp

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