Vaccine brings FOMO (fear of multiples overstretched)

Mathan Somasundaram

Deep Data Analytics

Local market was aimless and volatile all day before ending slightly positive. We were catching up from yesterday’s ASX shutdown after the first 30 minutes. US market has had multiple days of vaccine related bounce when the upside is the same and delayed. The Moderna vaccine is better for transport logistics than Pfizer but the initial data sets being used for massive efficacy are misleading. It is hard to justify a global vaccine solution based on less than 100 sample out of 30,000. The vaccine is probably one of the better vaccines and there will be more trial results in the next few weeks. The efficacy will probably fall to around 70-80% with full set of data and that is still very good. But the main problem is that production will only cover US by mid-2021 and that is assuming they can get the polarized country to take it. Recent trend and self-serving politics suggest there will be 10-20% that will not take it and hence break the theory of eradicating the virus. We still do not know how long the vaccine gives protection and if 10-20% do not take it and then bring new waves, we may need more vaccine to cover US than previously planned. Looking outside US, worldwide coverage on production and transport logistics is likely to take to the end of 2021 at best but more likely into early 2022 for most of the Emerging Markets.

US politics has also ramped up. Trump administration is ramping up election uncertainties while collecting donations for legal fights that they are dropping in major states. Covid pandemic is hitting historical high levels in cases and hospitalisation which is forcing even Republican Governors to start basic restrictions in several states. Given the lack of US Federal leadership and election uncertainty, expect these restrictions to rise to higher level in the next month as numbers get worse. Trump administration has been quoted in the media for (1) looking at options to attack Iran and then walking away on collateral risk (2) looking at more China related trade/investment restrictions (3) Middle East policy changes (4) delaying election results being confirmed (5) stopping government agencies working with Biden transition team. Not expecting the uncertainty and volatility to subside anytime soon!!!

DotCom was the last time we had such exuberance and market multiples. If history is any indicator of future performance, Russell relative performance to S&P 500 hitting positive territory was the trigger point for NASDAQ to start the big underperformance cycle against S&P 500. We may be closer to that scenario than we think…buckle up!!!

Overnight US market moved higher on another vaccine hopeful from Moderna despite historically high COVID cases and hospitalization. Efficacy rates will come down with more data but Moderna vaccine is easier on logistics than Pfizer as it can be stored in normal fridges and freezers. May be why Pfizer management dumped big chunk of their shares on their update before this update came out. Bond yields bounced on inflation outlook and growth to value switch continues. Russell is the best performer while NASDAQ is the laggard. US$ remains weak and supported higher commodities...AUDUSD now over 73 cents. Gold was steady. All sectors except Health Care were in the green with Energy and Industrials leading...moving from high growth to cyclical growth. Trump camp continues to argue against election results, collecting donations and dropping lawsuits about election in number of states. Biden camp talking about $10-50k student loan forgiveness via executive orders. Bond market flagging Inflation. Last thing an asset bubble based on stimulus needs is a vaccine. Economy and Markets have different wants and needs!!!

Remain nimble, contrarian and cautiously pragmatic with elevated global macro risks!!! Buckle up...it’s going to get bumpy!!!

Not already a Livewire member?

Sign up today to get free access to investment ideas and strategies from Australia’s leading investors.

........
Deep Data Analytics provides this financial advice as an honest and reasonable opinion held at a point in time about an investment’s risk profile and merit and the information is provided by the Deep Data Analytics in good faith. The views of the adviser(s) do not necessarily reflect the views of the AFS Licensee. Deep Data Analytics has no obligation to update the opinion unless Deep Data Analytics is currently contracted to provide such an updated opinion. Deep Data Analytics does not warrant the accuracy of any information it sources from others. All statements as to future matters are not guaranteed to be accurate and any statements as to past performance do not represent future performance. Assessment of risk can be subjective. Portfolios of equity investments need to be well diversified and the risk appropriate for the investor. Equity investments in listed or unlisted companies yet to achieve a profit or with an equity value less than $50 million should collectively be a small component of a balanced portfolio, with smaller individual investment sizes than otherwise. Investors are responsible for their own investment decisions, unless a contract stipulates otherwise. Deep Data Analytics does not stand behind the capital value or performance of any investment. Subject to any terms implied by law and which cannot be excluded, Deep Data Analytics shall not be liable for any errors, omissions, defects or misrepresentations in the information (including by reasons of negligence, negligent misstatement or otherwise) or for any loss or damage (whether direct or indirect) suffered by persons who use or rely on the information. If any law prohibits the exclusion of such liability, Deep Data Analytics limits its liability to the re-supply of the Information, provided that such limitation is permitted by law and is fair and reasonable. Copyright © Deep Data Analytics. All rights reserved. This material is proprietary to Deep Data Analytics and may not be disclosed to third parties. Any unauthorized use, duplication or disclosure of this document is prohibited. The content has been approved for distribution by Deep Data Analytics (ABN 67 159 532 213 AFS Representative No. 1282992) which is a corporate approved representative of BR Securities (ABN 92 168 734 530 and holder of AFSL No. 456663). Deep Data Analytics is the business name of ABN 67 159 532 213.

Mathan Somasundaram
Founder & CEO
Deep Data Analytics

Over 25 years’ experience in the finance/tech industry. Mathan has worked extensively in all parts of the finance sector (i.e. County NatWest, Citi, LIM, Southern Cross, Bell Potter, Baillieu Holst and Blue Ocean Equities). Currently Founder and...

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.