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Invesco’s chief global market strategist Kristina Hooper joins Kristin Myers of Yahoo Finance on how markets are responding to Pfizer’s positive news on the COVID-19 vaccine.
Video transcript
KRISTIN MYERS: So we’re now joined by Kristina Hooper, Invesco’s Chief Global Market Strategist. And, Kristina, as we see the market soar today, you mentioned in your note something that I really want to highlight, which is that the market may be too far ahead of itself. It seems the markets have been doing this steadily over the past couple of months, really hanging on to any good news they’ve ever received and really taking that into account. Do you think it can happen here? And if so, do you think we could prepare for a pretty big setback, like the one we saw not so long ago?
KRISTINA HOOPER: Well, I’m afraid the market is getting ahead of itself, but not in a way that prepares it for some dramatic setback. I just want to recognize that we can’t drive the stock market up day in and day out on the basis of this particular news feed. Yes, it’s great to hear this announcement about the development of a vaccine that seems so effective. But as Jared explained, there are a lot of steps between here and when it’s widely distributed. And there will be tough days when we hear disappointing news.
There will likely be delays in its release, or there could be poor test results. There is a lot that can happen between now and FDA approval and wide distribution. So we just have to recognize it. But it is certainly understandable that we have a rally on a day like today. We just have to recognize that it’s not – not every day will be a gathering between now and when it’s distributed.
KRISTIN MYERS: So, to pick up on what Jared said, because he wasn’t too optimistic about vaccine stocks in particular, what do you think is going to happen more broadly in the health care sector in the world? ‘to come up? Is this a sector or an industry that you think people really should start to cram in? Or is this something that everyone should take more of a wait-and-see approach?
KRISTINA HOOPER: Well, I think it makes sense to have some exposure to health care, sure. but we must recognize that what we often expect, especially under a particular administration, does not necessarily happen. For example, there was a lot of concern about healthcare and the viability of parts of the healthcare industry at the head of the Obama administration, but healthcare was one of the top three performing sectors in the S&P. 500 for several years under Obama. administration. Likewise, we’ve seen a lot of enthusiasm around energy as President Trump came to power, yet energy has been the worst performing sector on the S&P 500 for the past few years. So we have to take everything with a grain of salt and recognize that what we expect may not happen. But there are certainly a lot of secular, long-term trends that suggest healthcare is an attractive place, including, of course, demographics.
KRISTIN MYERS: So to continue a bit, you know, today travel stocks were really starting to increase following this vaccine news. But on the other hand, we see some of those focus games, Zooms, Amazons, for example, that really don’t do very well and take a beating. Do you think that with this news there will be sectors – and I know you just mentioned after the elections which sectors have performed well or not well in the long term – do you think there are sectors to come on this vaccine news which will continue to outperform the market more widely and if, on the other hand, you see that certain sectors are really being set up or being created, for example, really underperforming?
KRISTINA HOOPER: Well i am not sure. And let me warn you that we have seen this model before. On the days when we receive positive news regarding vaccine developments or therapies, or when we get solid economic data suggesting the recovery is more robust, we typically see cyclical names, some of the key themes associated with the return to health. normal. economy, perform well. And that, of course, comes at the expense of those more defensive, secular growth names and, of course, those key themes that have been so closely associated with the pandemic, like the stay-at-home theme.
What is likely to happen in the future is what we have seen in the past. There will be days when the news flow is positive around the vaccine, around a more robust economic recovery. And these are days when we will see the cyclical side outperform and vice versa. But – and there might be more days when we see the cyclical side outperform in the future, because we see that proverbial light at the end of the tunnel.
But let me say that many of the names associated with this theme of working from home, there are a lot of driving forces behind them that have nothing to do with the pandemic. What – what we’ve seen over the last six months or so is an acceleration of trends that were already in place before the pandemic and which I would say will remain so after the pandemic. So I wouldn’t give up by far.
KRISTIN MYERS: Kristina, before I let you go, of course I have to ask you what you think is going to happen in the future with the economic recovery given this news, or do you think it might be a little too soon to us to start coming up with ideas on what the economic recovery will look like with this vaccine as it is right now?
KRISTINA HOOPER: Well, I think it’s a little premature. But it’s exciting to think that, potentially, our upside scenario could materialize. I’ll stick to a baseline scenario, which assumes that we won’t get a widely distributed vaccine until mid-2021 or the second half of 2021. But if, certainly, that timeline were to increase, that would suggest, yet another. times, earlier rotation and sustained rotation to the more cyclical parts of the stock market, the smaller cap parts of the stock market.
So it’s a very exciting time. And keep in mind that whatever scenario we see, however strong the economic recovery is, we have the Fed behind us, and it’s a really powerful force.
KRISTIN MYERS: Okay. Well, we’ll have to stop there. Kristina Hooper, Chief Global Market Strategist, Invesco, thank you for joining us today.
KRISTINA HOOPER: Thank you.
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