Pfizer’s vaccine announcement saw gold and gilts sell off, while European equities rallied by 5% on Monday. Meanwhile, the tech stocks that boomed during the pandemic – and last week – saw the Nasdaq drop by 1.5% on the same day as Eurozone markets flew. Fast-rising home delivery stocks, Ocado and Just Eat, shed 5.21% and 3.36% respectively on Tuesday. Similarly, e-commerce took a knock, with Amazon dropping 2.87%, and Alibaba falling by a notable 5.10%. And, while Amazon, Just Eat and Ocado posted some impressive recoveries on Wednesday (with the latter up by over 6%), Alibaba dipped by an additional 9%. The question is: will Western tech stocks follow the lead of the Chinese e-commerce giant in the coming months. Speaking on tech stocks, and the ongoing growth vs value equities discussion, Moneyfarm Chief Investment Officer, Richard Flax, said we ought to: “Remember that in a COVID-19 world, digital businesses rule. They clean up in terms of advertising revenue and sales. Traditional businesses suffer. They have rent, they pump oil, they borrow short and lend long in a world of zero interest rates. And growth stocks crush value stocks, at least in terms of performance.”

“But in a post-COVID world, where growth begins to recover, alternatives begin to emerge. Digital businesses look expensive. Their multiples are high, their prospects perhaps over-hyped (at times). And then everyone starts thinking about things like mean reversion and hoary old sayings like ‘trees don’t grow to the sky’ (like they said about Amazon in 2014/15/16/17 etc). It probably explains why Zoom fell 17% yesterday.”

With that being said, the COVID situation is far from resolved. Not only do we need to discuss further rising numbers in cases and deaths – as seen with Delhi’s third wave, and likely Western infection rates over the festive period – but also the difficulties in delivering vaccinations. Indeed, as Kingswood CIO, Rupert Thompson notes, the Pfizer and BioNTech vaccine is “a major step forward but it is not a silver bullet”. Between transportation, mass production and storage at very cold temperatures, the logistical considerations of rolling out a vaccine at a vast scale are innumerable – and will prove challenging if policy implementation to-date is anything to go on. Similarly, we need to consider who will be prioritised for the vaccine, how long immunity will last for and – crucially – who will actually be willing to be vaccinated. Figuring out these variables will determine the timeline for suppressing COVID infections and deaths – and ultimately, when life can return to some semblance of normality. Certainly, there could be further reality checks for tech stocks, as a vaccine being delivered will see their dominance eroded by the return of equities, which have so far languished during 2020. With that being said, there are likely to be speedbumps ahead, in both COVID cases and the roll-out of the vaccine – not to mention potential disappointments over its efficacy in the field. With that in mind, markets certainly over-priced the positivity of Pfizer’s announcement on Monday. Tech stocks may see their day in the sun expire, but anyone saying that COVID challenges will soon be behind us, is speaking prematurely. E-commerce, consumer tech and gaming may all be set for big Christmas periods, so writing them off now may be the wrong move. Presenting a scenario in which vaccines can be stored and administered with few hiccups, assuming that economies can recover, and that 2020’s unloved stocks will enjoy a resurgence, Mr Flax offers a different outlook on tech stock and growth equities in general:

“If the answer to all three is yes – then value could outperform growth. European equities could beat the US, and the Nasdaq might languish, if only briefly. Today’s markets suggest that the answer is indeed yes. We’ve had days like that before, and they’ve faded. But maybe this time will be different.”