Tags: Coronavirus | value | stocks | virus | vaccine

Ridiculed Value-Stock Bets Look Brilliant on Vaccine News

Ridiculed Value-Stock Bets Look Brilliant on Vaccine News
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Monday, 09 November 2020 09:59 AM

Much-maligned value stocks are surging after a potential breakthrough in the race for a Covid-19 vaccine ignited a global risk-asset rally.

The $53 billion Vanguard Value ETF (ticker VTV) rocketed 5.7% higher in premarket trading as of 8:30 a.m. in New York as shares of banks, airlines and cruise companies climbed. This followed a large-scale study of the Covid-19 vaccine being developed by Pfizer Inc. and BioNTech SE showed it prevented more than 90% of infections. Meanwhile, December contracts on the tech-heavy Nasdaq 100 fluctuated as the so-called stay-at-home trade stumbled, led by a plunge in Peloton, Netflix and Zoom.

It’s a potential reversal of fortunes for value stocks -- those that look cheap relative to fundamentals -- which have been battered this year as coronavirus lockdowns descended around the globe. These restrictions favored super-sized tech companies, with investors wagering that the likes of Amazon.com Inc. and Apple Inc. were best poised to weather the pandemic. However, the possibility of an effective vaccine could be the catalyst needed for a leadership rotation in equity markets.

“If you layer in this news on a vaccine, I think you still start to see this leadership rotation from growth and technology into value and cyclical,” said Jeff Mills, chief investment officer for Bryn Mawr Trust. “This news is going to be important for the leadership backdrop of the market.”

December contracts on the small-cap Russell 2000 went limit up at 6:40 a.m. and stayed there after futures surged 7%. Meanwhile, the $1.9 billion US Global Jets ETF (ticker JETS) jumped nearly 19% premarket.

“That will, in fact, light a fire under the rotation out of what has been working -- megacap technology and health care names -- and into economically sensitive cyclicals,” Arthur Hogan, chief market strategist at National Securities Corp., said by phone. “We’ve seen fits and starts of that rotation over the course of the last couple of months but clearly needed news on the vaccine front to really start that in earnest.”

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Much-maligned value stocks are surging after a potential breakthrough in the race for a Covid-19 vaccine ignited a global risk-asset rally.
value, stocks, virus, vaccine
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2020-59-09
Monday, 09 November 2020 09:59 AM
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