Goldman: Covid-19 vaccine approval could upend markets
Investors should consider the risk of a successful coronavirus vaccine unsettling markets by sparking a sell-off in bonds and rotation out of technology into cyclical stocks, according to Goldman Sachs Group Inc.
The increased probability of an approved vaccine by the end of November is underpriced by equity markets, wrote strategists in a note. Over the next few months, the ramifications of the U.S. election and the evolution of the virus -- in part as schools reopen -- are also likely to be key drivers of the market, they said.
Approval of a vaccine could “challenge market assumptions both about cyclicality and about eternally negative real rates,” the team wrote, adding such a scenario may support steeper yield curves, traditional cyclicals and banks, while challenging the leadership of technology stocks, Bloomberg reported.
If this happened along with a change in the U.S. administration, emerging market equities could benefit “if trade policy risks diminish while U.S. tax risks rise,” according to the note.