The Market Has Positive Expectations of Black Friday Holiday Sales Numbers

North American markets today, Friday, viewed several hours before the opening appear poised to start on a positive note. Many indicators are in the green at the time of writing, although the DOW shifted between green and red while I wrote this column. It is always possible that this can change before and after market opening.

Major European indicators such as the DAX and CAC 40 are in the green, but the FTSE 100 is in the red at time of writing. 

The positive factors weighing on the markets this morning include expectations of Black Friday Holiday sales numbers, the transition to the administration of President-elect Joe Biden and an outlook – however nervous – about vaccine cures.

At the same time, the negative factors at work include disappointment over developments in the vaccine field, especially involving AstraZeneca plc.

Shares dropped earlier in the week as questions arose about the effectiveness of its vaccine. According to a CNBC report, Moncef Slaoui, who heads Operation Warp Speed, and others have expressed concerns about AstraZeneca’s tests.

CNBC also reports that analysts at health care and biotech investment bank SVB Leerink LLC. wrote on Monday: "We believe that this product will never be licensed in the U.S."

That one sentence is exceptionally strong language counterpointed against the optimism of AstraZeneca’s Monday morning announcement, especially since Leerink has a track record in this area. If the bank’s analysts have it right, the implications for AstraZeneca are enormous.

Leerink also says that "This belief is based on the design of the company's pivotal trials which does not appear to match the FDA's (Food and Drug Administration) requirements for representation of minorities, severe cases, previously infected individuals and elderly and other increased risk populations.”

Not surprisingly, AstraZeneca pushed back against those appraisals, promising more tests, more data and more results soon. A company spokesperson told CNBC that the tests had been conducted ‘to the highest possible standards.’

Notwithstanding AstraZeneca’s protestations, its shares dropped. That was the second blow in as many days and followed news that Russia planned to sell vaccines at $20 per dose, a move which, if it crystallizes, would affect the profitability of AstraZeneca and other vaccine firms. The pre-market price this morning is ranging around $51.70, down from Wednesday’s close of $52.60. Whether it recovers and turns positive during the day remains to be seen. What also remains to be seen is whether this casts doubts over other companies rushing vaccines to market.

To an extent, this kind of fluctuation comes with the territory of investing, suggests Jay Nash, Senior Vice President of National Bank Financial in London. “If you choose to own individual stocks you will always be subject to short term changes in opinion or expectations,” he says, “That’s just the way it works.”

Alternatives include owning an exchange traded fund with a fixed selection of stocks or a broad-based mutual fund where the manager decides which stocks to own, which to sell, which to overweight and which to underweight.

As with any invention hitting the market there will be many winners and losers, Nash says. “If we could know which was which investing would be really easy.” That makes investor choices in this area more difficult than usual.

Nash suggests that almost all stocks are subject to their future being questioned and that issues will always arise. “Each investor has to decide if the issues are real or fake,” he says, “In 2007 you could find analysts claiming that the iPhone would flop….”. Analysts also expected the death or near death of Blackberry. Only one of those predictions was right, he recalls.

If AstraZeneca can eventually prove its claims its stock could recover over time.

Vaccine stocks are only one of a huge number of uncertainties currently affecting the market. However, there are also some certainties that can be regarded as definite for the short and medium terms, amongst them continuing low interest rates. While these benefit consumers and corporations, they also benefit governments concerned about their own debts. Federal Reserve Chairman Jerome Powell has said that rates will remain low until 2023 which in real terms is a little more than a year away. It is reasonable to believe that the low rates will last longer, meaning that investing in interest-bearing assets will continue being unappetizing. That will continue driving more money into the market than otherwise might have been the case.

(That also has continuing implications for retirement planning, and I’ll review them at in a future edition.).

Related: The Transition Towards a Biden Presidency Has Paved the Way for Market Gains