JPMorgan: Short These Stocks When Vaccine is Ready
Strategists at JPMorgan have been analyzing the impact of a COVID-19 vaccine on equities and recommend these shorts, according to MarketWatch.
Pfizer and Moderna believe their COVID-19 vaccines will be ready by the end of the year. This would be great news for the economy so that face-to-face interactions can resume. However, the impact of a vaccine could be bad for companies that have thrived during the pandemic. Strategists at JPMorgan put together this list of companies that they believe have significant downside when a vaccine is approved.
These stocks are at the “upper echelon of momentum and have crowded positioning, that could see the second derivative of their profit growth decrease as consumer / corporate activity normalizes,” said the JPMorgan team.
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The strategists also analyzed the impacts of the US election where former Vice President Joe Biden is predicted to win,
“Given the large divergence between these two baskets (i.e. similar to momentum/value), coupled with our expectation that COVID-19 headline risk likely declines postelection, we see an increasingly compelling case for value in the coming period. Deep value, namely energy and financials, would likely be key beneficiaries of an ‘orderly’ Trump victory and could see a large short squeeze. Under a Biden scenario we could also see profit-taking from high momentum stocks, especially as investors start to price in risk of higher capital-gains tax,” they said.
There are significant catalysts for stocks that could provide significant upside or downside. Investors would be smart to review their holdings and evaluate the impact of a COVID-19 vaccine or Joe Biden win.