October 22, 2020

Markets expect any COVID-19 vaccine approved this year to be only 50% to 60% effective, asset manager Balyasny says

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A medical worker gives a volunteer a trial vaccine against COVID-19 at Moscow’s N62 Outpatient Clinic.

  • Hedge fund manager Dmitry Balyasny said markets expect any COVID-19 vaccine approved this year to be only somewhat effective, Bloomberg reported.
  • A 50% to 60% rate of effectiveness would allow some recovery stocks to rally when a vaccine shot turns out to be more potent, Balyasny said at a virtual discussion hosted by Citigroup.
  • Once a vaccine shot is 80% to 90% effective, markets will start to look through the current weakness for companies that are badly affected, he said.
  • While he did not name any specific stocks and sectors, he suggested this sentiment would drive equities outside the mega-cap technology sector. 
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Stock markets are currently pricing in chances of any COVID-19 vaccine approved this year to only be 50% to 60% effective, Bloomberg reported Balyasny Asset Management’s Dmitry Balyasny saying.

That would allow for some unpopular equities, or recovery stocks, to rally when a vaccine shot turns out more effective, he said.

Balyasny, whose firm manages around $118 billion, said once a vaccine is 80% to 90% effective, markets will start to look through the current weakness for stocks that are badly hit.

These stocks, especially in the retail and financial sector, have been eclipsed by the ascendance of mega-cap technology stocks that profited from the work-from-home norm.

“If there is a solution where the markets are confident that, well, OK, this is a real solution to the problem, whether it takes three months or six months, the stocks will move ahead of that,” Balyasny said at a Citigroup virtual conference.

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The race for a coronavirus vaccine has been hit by setbacks of late. Johnson & Johnson halted all dosing associated with its vaccine trials on Monday after a participant developed an “unexplained illness.”

US rival Eli Lilly also paused trials of its COVID-19 antibody treatment after an independent board of experts raised safety concerns.

In September, British pharma group AstraZeneca paused its own trial over concerns a participant may have had a serious adverse reaction. Though trials in the UK have resumed, the US trial is still on hold and is under further review by the Food and Drug Administration.

Balyasny said investors are expecting only a somewhat effective vaccine to be distributed and improved over next year. By the later half of 2021, “you sort of start getting back to normal,” Bloomberg reported him as saying.

While he made no mention of specific stocks and sectors, he suggested this sentiment would drive equities outside the technology sector. 

“As soon as there is light at the end of the tunnel for that, you can get a rotation,” the asset manager said.

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