Stock markets expect a Covid-19 vaccine to be approved this year that is only 50% to 60% effective, leaving room for some unloved equities to rally if the shot turns out to be more potent, according to Balyasny Asset Management’s Dmitry Balyasny.
Balyasny, co-founder of the Chicago-based hedge fund, said faster and more effective medical progress could bring buyers back to beaten down shares. Such stocks have been overshadowed by the climb in megacap technology equities that benefited from social distancing.
“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 from the U.S. during a Citigroup Inc. conference.
The push for breakthroughs to contain Covid-19 stumbled this week after pharmaceutical giants developing treatments and vaccines suffered clinical setbacks. Viable inoculations and drugs are seen as key to curbing the pandemic and improving a tough outlook for the global economic recovery.
Balyasny said his view is that investors currently expect a partially effective vaccine to be administered and improved over the course of 2021. By the second half of next year, “you sort of start getting back to normal,” he said.
But if a vaccine with 80% or 90% effectiveness arrives and is administered much faster, “markets will start to look through the current weakness for the companies that have really been affected,” he said.
Balyasny didn’t name specific stocks or sectors, but signaled this kind of backdrop would help equities outside of the large-cap technology sector.
“As soon as there is light at the end of the tunnel for that, you can get a rotation,” he said.
— With assistance by Nancy Moran
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