Buy everything? Experts warn Pfizer COVID vaccine rally 'premature'

The Pfizer COVID vaccine breakthrough has led to a global market rally which has hit the ASX.

Overnight, biotech giant Pfizer released interim data of a clinical trial of its COVID-19 vaccine candidate. It only caused 94 infections among 44,000 participants – a success rate above 90 per cent.

Market rallies are not without precedent since the end of March. But the upheaval of COVID norms has made this rally unique.

Stocks that had been slammed for months on end, such as travel stocks, saw significant rallies. On the other hand, stocks that had seen growth for months on end saw a retreat, particularly in the gold sector.

For months a COVID vaccine has appeared as the only way to return to pre-COVID norms.

Seema Shah, chief strategist at Principal Global Investors, said today’s news, “suggests a ‘return to normality’ should be coming sooner rather than later”.

But other analysts are warning be this as it may, investors shouldn’t get too excited.

‘Obviously a positive step’ but ‘still a way to go’

Another analyst who commented on today’s news was eToro’s Adam Vettese.

While he noted this was an injection of optimism – particularly in the travel and oil sectors – we shouldn’t get ahead of ourselves.

“This is obviously a positive step forward there is still a way to go,” he said.

“Pfizer will only be able to submit its vaccine for emergency use once two months of data has been collected.

“All eyes will be on the third week of November then as we wait to see if the numbers show the vaccine can be approved.”

Nigel Green, the founder of deVere Group, also labelled the Pfizer COVID vaccine breakthrough an important step. But he said investors were overthinking the positive news.

“They are being premature in their buoyancy,” he declared.

“There’s a long road ahead still. We will find out on the third week of November to see if the vaccine can be approved or not.”

Green also warned a return to pre-COVID norms was no guarantee even if a vaccine eventuated.

“I would urge investors to remain optimistically cautious and avoid the ‘buy everything’ mindset,” he said.

“The world is still readjusting and many of the changes that have come about from the pandemic are unlikely to be reversed, including the workplace revolution in which more and more people are working from home.”

Biden win driving stocks too

After the US election finally concluding, you’d be forgiven for wanting to forget about it.

But both deVere Group’s Green and Principal’s Shah said the election outcome was also driving positive market sentiment.

Shah was particularly bullish on the election outcome labelling it as “arguably the most favourable scenario for investors”.

“A split Congress or even a blue sweep with a very marginal majority implies that neither large tax hikes nor major changes in regulation are likely,” he said.

“All the chips are starting to line up, and market sentiment may be in the early stages of a burst of positive energy.”