by Jason Norris, CFA
Executive Vice President
This week, “all the world’s a stage,” especially for William Shakespeare, the second person to be inoculated with the Pfizer vaccine in the UK. In the U.S., an outside panel of independent experts recommended Pfizer’s vaccine approval for emergency authorization. And as indicated this morning, FDA emergency use authorization approval should come shortly. As vaccine distributions continue into 2021, we should see an increase in global growth, which will continue to support the equity markets next year.
While Pfizer’s vaccine is the first to be approved, the queue of other companies’ vaccine developments looks promising. The chart below highlights the expected six billion treatments for 2021 worldwide distribution by the major vaccine manufacturers.
Source: Goldman Sachs
Analysts are expecting the U.S. population to start developing herd immunity by mid-summer. This is based on the expectation that 200 million, or approximately 60 percent, of the U.S., will be inoculated over the first six-to-nine months of 2021. This will only be possible with the addition of other vaccines awaiting Phase 3 testing results and FDA approval, as well as a relatively seamless manufacturing and distribution process. Goldman Sachs recently released data where they expect there to be a 90 percent likelihood that this will occur.
These positive developments lead us to believe that economic growth will be strong in 2021 and the unemployment rate will continue to fall. According to the Bureau of Labor Statistics, most of the current unemployed population are in the leisure and hospitality sectors. Therefore, as travel and socialization increases, many of these individuals should be able to return to work. We are not discounting the near-term headwinds of rising cases and hospitalizations; however, markets discount the future, which is why we believe that investors should continue to stay invested in equities, even after the strong rally we have experienced.
Renaissance’s Renaissance
One of best performing indices year-to-date has been the Renaissance IPO ETF. This index adds recent companies that are made public and holds them for roughly two years. While the index performed roughly in-line with the broad market through March, its rebound has been furious: the index is up over 180 percent since the bottom, outpacing the S&P 500 gain of 65 percent.
Source: FactSet
The year was a record year for the IPO market as companies raised over $163 billion on U.S. exchanges. This was highlighted this week with two major IPO launches: DoorDash® and Airbnb™. Both companies had healthy demand for their new public shares resulting in market values of over $45 billion and over $100 billion, respectively. Both businesses have found opportunity during this turbulent year: DoorDash® had a major advantage during economic restrictions, and Airbnb™ will see an increased benefit as restrictions are lifted and travelers may be leery of staying in hotels.
Week in Review and Our Takeaways from the Week:
Vaccine inoculations will result in increased economic activity in 2021
Stocks took a breather this week resulting in the S&P 500 falling approximately 1 percent. However, small cap stocks continued their recent positive momentum rallying 1 percent