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WHEN PFIZER and BioNTech, two pharmaceutical companies, revealed in November that their covid-19 vaccine was more than 90% effective, as celebrated by health experts around the world. The stock markets, however, responded with a simple golf swing. the S&P 500, a technology index of large American companies, rose just 1.2% that day.
There are at least two plausible explanations for this silent reaction. One is that investors were already expecting such success. Although market views on the prospects for vaccines cannot be measured directly, Good Judgment, a consultancy that uses a group of “super forecasters” to make predictions, offers an approximation. In April, it began publishing a daily probability that enough vaccines will be distributed to inoculate 25 million Americans by March 31, 2021. When Pfizer released its results, forecasters raised this value from 53% to 88%, which shows that the result was really a surprise. (Pfizer shares were also up 7.7% on the news.)
That leaves the other likely cause of the mixed signals from the markets: a successful vaccine may not help companies that have benefited from the social changes caused by COVID-19. In a study testing this theory, Goldman Sachs, a bank, looked at how stocks in each industry had responded to changes in the odds of a vaccine arriving early. It found that tech companies, whose products have enjoyed faster adoption during the lockdowns, lagged behind the market as prospects for vaccines improved. On the contrary, energy and materials companies recovered more under these conditions.
To extend this investigation, we have applied your calculation of “excess return” (return relative to market averages) to all publicly traded companies around the world with a value of at least $ 10 billion, every day from April 27. We then measure the relationship between the surplus returns of each company and the daily changes in the estimated probability of mass vaccination by the super forecasters for March 2021. Finally, we group the results by industry, breaking down the subsectors most likely to show significant effects. .
This method produced a more intuitive list of winners and losers. Hotel, restaurant and airline stocks have been traded closely in line with the estimated date of arrival of the vaccine. In contrast, consumer durables companies, including manufacturers of swimming pool supplies, appliances, and exercise bikes, tended to lag behind the market when vaccine producers made progress and outperformed when they suffered setbacks. Healthcare stocks (barring those of vaccine makers themselves) and tech and e-commerce companies driven by the lockdowns also showed this pattern.
However, we also found more surprising results. The fortunes of financial companies tend to mirror the broader economy, but the link between progress in vaccines and profitability of financial stocks was unusually strong, almost as strong as for leisure companies. Banks, which have made large provisions for loan defaults, would enjoy a windfall if no such losses occur. And credit card issuers like American Express will benefit from the return of international travel.
Meanwhile, the performance of retailer stocks has curiously not been correlated with the vaccine news. When Pfizer announced its results, stocks in big discount stores like Burlington, Ross and TJX arose. However, those at big box stores like Best Buy and Target sold out, perhaps because investors expected consumers to switch to other types of spending once they felt safe traveling and socializing again. ■
Sources: Good judgment; Bloomberg; The Economist
This article appeared in the graphic details section of the print edition under the heading “What goes up.”
