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US equities were stronger overnight as another week has brought a fresh round of positive vaccine news. This time, AstraZeneca and Oxford University indicated their vaccine is as much as 90% effective in preventing COVID-19 infection, though also noted efficacy varied widely based on dosage.

AstraZeneca (AZ) news is the real deal. The healthcare world should be ecstatic as the AZ candidate success means most of the developed world will be able to immunize its most at-risk to Covid-19 population by the spring and likely the entire community by mid-year.

It is an intuitive fact of life in the financial markets that highs get made on good news. 3640/3670 is now a massive resistance band in S&P 500 as those are the Pfizer and Moderna day peaks.

So now the sought-after question is, “How much of the vaccine news is in the price? ”

I think not a lot as heard immunity brought on by worldwide distribution of the vaccines will dominate the natural economic landscape for the next 24 months, at least. The multiple vaccine releases are a watershed moment for travel and leisure concerns, and Covid-19 hibernation will soon be behind us.

And while I can assure you that unexpected market air pockets will become less turbulent going forward, still, some markets and stock sectors will naturally struggle to follow-through, without stronger growth showing up and possibly more stimulus (monetary or fiscal).

And before the real risk on rotation party starts, the workability of mass vaccination must be overcome, with herd immunity in sight, that will lead to economic ebullience as social distancing unwinds and the most subjugated sectors dependent on human interaction will rebound dramatically.

I think stock bulls could be excused from not jumping for joy as the current market leaders in aggregate lean fully valued. Still, there will be an immeasurable opportunity in the rotation back to those sectors most hampered by social distancing.

But the fact of life in the stock market fast lane is that investors are cooling on big Tech as leadership volumes are drying up with P/E’s becoming concerns as investors are quietly checking out undervalued pockets around the globe.

Keeping in mind it is US Thanksgiving week, and lately, the market has been in risk-reducing mode given that year-end is within reach, so it is difficult to gauge the market’s true bull factor.

The power vacuum in Washington looks to be sucking less life out of the markets after the General Service Administration gave the nod to Biden as the apparent winner of the US election.

FOMC

Investors have been reading too many speculative headlines thinking the FOMC minutes on Wednesday could indicate QE duration extension in December. US Fed Chair Powell did not give any indication after the last meeting, nor have recent Fed speakers.

The Fed’s communication seems to be all about policy’s longevity rather than expanding; the board will probably sit tight in December.

I would also say it is not surprising Fed officials are staying on the fence. They want to be extra careful not to trigger undue market reactions and not to take sides politically, as we are still in a very charged environment.

Oil rises on vaccine news

Oil benefited from the vaccine news, with WTI trading around $43 a barrel and Brent near $46 even when US dollar rallied on positive US PMI numbers and taking a bit of steam out of the broader commodity markets.

While the air looks a bit thin above WTI $43, still, the announcement over the weekend that US COVID-19 vaccinations could begin in early December has spurred another wave of optimism for oil and wider markets, bolstered yesterday by the AstraZeneca version of the vaccine.

Oil markets are rightly jumping for joy as the AstraZeneca delivery is a big deal as most of the developed world will be able to immunize its most at-risk population to COVID by the spring and likely the entire community by mid-year.

The continuing increase in infections in the US and elsewhere has been the primary source of oil demand uncertainty ahead of the OPEC+ meeting at the end of this month. Progress on developing and distributing a vaccine de-risks the path back to normal for oil markets.

If mobility data is a measure of oil price sentiment, in the not too distant future, the vaccine will get people back on aeroplanes and cruise ships into St. Mark’s Square. It could be the pent-up travel party of all time!

Abu Dhabi is to step up oil production and increase investment, even though OPEC strives to cut output. Bloomberg reports that Abu Dhabi is to invest $122 bn to extract two billion barrels of crude that it recently discovered in its existing oil fields.

The curve has continued to shift, flattening considerably from 3Q21 into 1Q22, with the time spreads from Dec21 now in backwardation. The shortage is priced into WTI from the end of next year as capital discipline remains the priority for oil firms.

Equity and Oil market analysis and insights from Stephen Innes, Chief Global Market Strategist at Axi