Last Monday, pharmaceutical company Pfizer announced that its vaccine against Covid-19 has been shown to be 90% effective and is in Phase II testing. That said, it will be available soon. The researchers did not identify any health risks during the tests and everything seems to indicate that distribution of the vaccine could begin in the first few months of next year. The vaccine requires two injections and cooling to minus 75 degrees Celsius. This makes distribution much more difficult. But the good news is we already have the first vaccine. Last but not least!
Financial markets around the world were the first to celebrate the arrival of the long-awaited vaccine. Thanks to Pfizer’s announcement, major stock indices were in the green for the first few days of the week. Pfizer’s shares are up more than 16%, causing the entire pharmaceutical sector to surge. The Dow Jones, Nasdaq, and SP 500 were all positive. But the increases were mixed. In recent hikes, the big winners have been the sectors hardest hit during the pandemic. Travel, cruise lines, cinemas, hotels, airlines, etc.
Read on: Bitcoin price outlook continues to rise, although coronavirus vaccine news has fallen
The tech sector, which has benefited greatly from containment efforts during the pandemic, is not an active part of the celebration. The Pfizer vaccine changed the dynamic. And investors are starting to pour money into the companies that will benefit most from a return to normal. For example, Zoom has lost more than 15% of its value. PayPal and Netflix are also among the big losers of the day.
We need to remember that when we say stock indices are positive we usually mean an average. And the averages show no sector performance. This means that a stock index can technically close positively, but movements can be mixed by sector. This was the case this time. Biden’s victory benefited all sectors, but the vaccine announcement favored some sectors over others.
We can’t complain. The technology sector has done very well this year. It is logical that the vaccine should initially help the sectors most affected by the containment measures. The money will be invested in companies that will re-register when the pandemic ends. Despite its positive correlation with the SP 500, Bitcoin is currently stagnating a bit. That said, it didn’t respond to the vaccine rally. And that’s because Bitcoin usually acts like a tech company. On this occasion the correlation was more specific and the focus was on the technology sector.
While the vaccine is not on the streets right now and the distribution process is more complicated than one could wish for, the markets are responding very well to hope. We must remember that investors make decisions primarily about assumptions and expectations. The information is generally incomplete and the future is very difficult to predict. Then fall back on assumption and expectation.
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Every investment is actually a bet in the future. We should buy today in order to sell at a better price tomorrow. Investing is the art of anticipation. It’s not an exact science because it depends a lot on the subjective. That is the origin of the irrationality of the markets.
The markets are growing with optimism. In other words, optimism creates new buyers. Of course, you could say that the most logical thing to do is to grow based on objective results. However, it is not always easy to get accurate data. The information available today always comes too late. And nobody knows what will really happen in the future. So investors have no choice but to rely on the current environment to predict the future. Know in advance that nothing is certain, but likely or unlikely.
Why the current optimism? Assumptions We assume that 2021 will be better than 2020 because we believe that we will gradually return to “normal”. The presidential election in the United States is lagging behind and the fraud allegations of outgoing President Donald Trump will lead nowhere. Joe Biden will be forced to launch an ambitious stimulus plan in the first 100 days of his mandate and we will certainly have a good package of fiscal and monetary stimulus in the first few months of the year.
In addition, there will finally be a science-based national strategy to fight Covid-19 in the United States. This will reduce infections and allow a faster return to normal. Of course, the cherry on the cake is the vaccine. You could say that things will look “normal” by next summer. Or at least a little less bizarre. Well, here are the assumptions of the moment.
When it comes to Bitcoin, the basic and technical specs are better than ever. And everything seems to indicate that the price of Bitcoin will benefit greatly from the economic recovery. The liquidity injections will certainly help the price rise sharply. With that in mind, the Federal Reserve and Uncle Sam will be our good fairies. The ungrateful bitcoiner will not be absent who will complain about the charms and cite a libertarian dogma taken from a book from the last century. However, I fear that the price of Bitcoin will benefit greatly from this liquidity. And inflation is kept under control.
Right now, the Bitcoin community is very excited for the arrival of institutional capital. In other words, Bitcoin is making waves on Wall Street. Of course, in general, the rumor tends to raise prices more than the news. And it’s obvious that because of greed, the Bitcoin market tends to go over the top quite a bit. Of course, we will make corrections, reversals, consolidations and increases at times. In general, however, it would make sense to look to the coming year with optimism.
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We need to remember that these assumptions can change overnight today. At any moment an event can occur that penetrates us with pessimism. If the price of Bitcoin goes down next week, that doesn’t mean we were wrong. That means our assumptions have changed. The atmosphere changed for some reason and suddenly our vision of the future became more sober.
I have to admit that a month ago I assumed that we would have more uncertainty today. He didn’t think the vaccine would be ready this year and he thought that the political environment in the United States would be a little less clear. However, the facts have unfolded. And now we can make more optimistic assumptions because the outlook is not that uncertain. The markets simply reflect that sentiment.