COVID Winners & Losers
Just over a year ago, stocks ended their COVID-19 induced freefall. From there, the stock market took on two personas, COVID winners and COVID losers. Taking a look at the graph below we can see the journey these two groups have gone on in the past year.
Source: Charles Schwab, Bloomberg, as of 2/28/2021.
Early on, Big Tech stocks, such as Apple (AAPL), Google (GOOGL)and stay at home companies such as Peloton (PTON) and Zoom (ZM) pulled the market higher. Companies like Amazon and Shopify thrived as people shopped more online (e-commerce sales up 32.4% in 2020 according to digital commerce 360), Food Delivery Apps like DoorDash boomed as restaurants were closed, and Zoom Video Communications surged as students and adults started meeting online. Other industries, like restaurants, oil, and airlines, were less fortunate and saw significant losses during lockdown periods.
The story changed the beginning of November when positive vaccine news was announced by Pfizer and Moderna, the Biden administration was elected, and stimulus packages were distributed. COVID “losers,” like banks (Goldman Sachs (GS), Wells Fargo (WFC), JP Morgan (JPM) all beat earnings expectations in Q1), energy producers, and hospitality whose profits would be the biggest beneficiaries of a stronger economy, started to lead the way. Whereas COVID “winners,” such as Peloton, Teladoc, Zoom and Doordash, saw huge pullbacks of more than 40% from their previous highs. Additionally, given the rapid rise in treasury yields and the flip from“Growth” to “Value” these companies have come under increased scrutiny against their valuations and expected future cash flows.
With recent negative news surrounding Johnson & Johnson regarding potential risks of blood clotting, scepticism towards vaccines is growing at an alarming rate. The US may follow a similar path as the EU, specifically Norway and Denmark, who have refused to administer the Oxford-Astrazeneca vaccine after blood clot concerns were raised. In a study published by the European Centre for Disease Prevention and Control, only 36% of Europeans strongly agree with the statement that “vaccines are safe.” If the same sentiment spreads throughout the US, paired with a shortage of vaccination, due to the Johnson & Johnson hault, a reversal in COVID winners and losers may be on the horizon.
Sources: Charles Schwab, Forbes, Chicago Tribune,
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