The tech-heavy Nasdaq has been selling off after news emerged that pharmaceutical giant Pfizer Inc. announced that its COVID-19 vaccine could be 90% effective. Optimism that the biggest health crisis of the last century could eventually be under control and that the global economy could get back to normal sent shockwaves throughout the investing community. Tech stocks outpaced the broader market during the coronavirus pandemic, but where do investors turn in a post-COVID-19 world?
Why Is a COVID-19 Vaccine Sending Tech Stock Lower?
The high-flying Nasdaq retreated in the first few days after Pfizer announced, based on early results, it’s COVID-19 vaccine may have a stunning 90% effective rate. Pfizer said in its announcement on Monday, November 9 that it will be applying later this month for emergency-use approval from the U.S. Food and Drug Administration (FDA). Whether a vaccine will be approved or not by the end of 2020 is not clear. If it is, supplies will initially be limited.
Still, the world breathed a collective sigh of relief that a return to normalcy is on the horizon. A vaccine will help the global economy return to normal, with people feeling comfortable enough to go out again, gather in public, travel, and go into offices and retail stores.
On Monday, November 9, the Dow Jones Industrial Average and S&P 500 both opened at record highs. That euphoria skipped the Nasdaq.
Since the stock market bottomed in March on coronavirus fears, the Nasdaq charged higher, with big tech stocks like Amazon, Facebook, Shopify, and stay-at-home and cloud stocks like Zoom Video Communication and CrowdStrike leading the way.
Between March 23, when the Nasdaq bottomed, and November 9, the day that Pfizer made the announcement, the Nasdaq soared 82%. By November 11 though, the Nasdaq had slipped more than 3.5%.
How Do You Invest in a Post-COVID-19 World?
Some analysts are saying this sell-off is the next leg of the bull-market. Again, tech stocks were the biggest winners during the coronavirus pandemic, but a return to normalcy could lead to a more balanced market.
Over the coming months, stocks that were hammered during the pandemic should begin to report more normal earnings while those that were juiced during the pandemic will return to earth.
That doesn’t mean that tech stocks will not rebound. It’s just really difficult to say how far the sell-off will go. Right now though, the idea that the world could return to normal has seen investors switching their big tech stocks into the industrial, energy, and material sectors.
Stocks like Tesla, Alphabet, and Microsoft are trading lower while Caterpillar, Boeing, and Honeywell are up. News of a vaccine has also been good for travel and entertainment stocks.
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A raft of successful COVID-19 vaccines should help the global economy start to return to normal in the first half of 2020. The same stocks that did well during the coronavirus pandemic, however, will not necessarily be the biggest winners in the post-COVID-19 vaccine world. The trading professionals at Learn-to-Trade.com understand that over the next number of months, certain stocks will experience the same kind of growth that tech stocks did after the markets bottomed in March.
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