- Goldman Sachs’ Erin Riley said the announcement of a COVID-19 vaccine will trigger a stock-market rotation into sectors that have been “deeply depressed” by the pandemic.
- The sectors are: transportation, sports, hotels, restaurants, hospitals, food, and beverages.
- This rotation could occur as early as the beginning of next year 2021, Riley said, citing super forecasters who expect enough doses of a vaccine to inoculate 25 million people to be ready by that time.
How and when to position for a post-vaccine world is the question at the top of many investors’ minds right now. Erin Riley, a Goldman Sachs financial adviser, said the announcement of a COVID-19 vaccine will spark a rotation into seven specific sectors.
“Certain value sectors like food and beverages exhibit very high positive correlation with rising vaccine probabilities,” Riley said on Friday’s episode of the Exchanges at Goldman Sachs podcast.
She also said these sectors that were “deeply depressed” by the pandemic could be well positioned for a catch-up: transportation, sports, hotels, restaurants, and hospitals.
Riley said data is showing signs that this rotation could occur as early as 2021.
“The majority of super forecasters expect there to be enough doses of an FDA-approved COVID-19 vaccine to inoculate 25 million people some time at the beginning of next year,” she added.
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Along with a vaccine catalyst, Riley’s clients have looked at the “massively bifurcated” stock market, where large technology names have seen massive gains while other sectors haven’t recovered their pandemic losses, as a signal that a rotation is due at some point in the future.
“The are essentially two economies trading, which suggests that the market remains very skeptical of any semblance of a return to normal. A lot of clients that I speak to are still constructive on growth technology stocks, which particularly owes to the low-rate environment and the acceleration in trends ignited by stay-at-home orders,” Riley said.
She added: “But low-valuation stocks now trade at their largest discount to high valuation since the tech bubble. And tactically, many clients think at some point this gap simply needs to converge.”