We are going to win the war against Covid-19. Science did triumph. We will soon be able to get the vaccine, meaning a two-shot inoculation, and it may be available to all by the end of the first quarter. Covid's looming defeat sent the market soaring, as it should have, to record highs, and it might not be done, given the momentum and the lack of exposure to the part of the market that soared today.
Now, we would be kidding ourselves to believe this market rallied, just because of Pfizer's (PFE) remarkable invention, one that seems to protect a miraculous 90% of those who take it, far more than the 50% to 60% that would have been satisfying. Ninety percent. That's just incredible.
It was far more than that. First, there has been a surge of the virus that's been downright frightening for all but the most diehard believers that it's no worse than a cold of a flu. Put simply, things are totally out of control. We just passed 10 million cases in this country. It is terrific that our care is so much better than it was when the pandemic decimated New York last spring, there has to be enough beds to care for people in order for the very sick to be saved. The cavalier nature of those who are not worried about death rates that go up to 4% in the older brackets, cause some of us to balance. Is this the modern day Logan's Run, a popular movie from 44 years ago, where those who turn 30 get killed? If you have 10 million sick, there will be a distribution among those who fit into that 4% bracket that we aren't supposed to be worried about, because they were going to die, anyway.
Our state-by-state method of trying to battle the virus has failed. You may say, so what, it's failing in the United Kingdom, in France and in Italy. I say wait, if we had contact tracing, social distancing, and masks, we would have a chance to be like China, Singapore or Taiwan, all of which have it under control and do not have economies that are teetering on mass unemployment. But health became political in this country, which is really amazing, and the rugged individualist tradition of Americans made it pretty much a given that we could not control it. It's amazing to me: We have the best contract trace technology from a joint effort between Alphabet's (GOOGL) Google and Apple (AAPL) that seems stillborn, because it requires people to give up information to a central data base and it seems like many Americans would rather die than do so. Masks? Very hard given that the president of the United States has made anyone who wears a mask feel like a wimp. He's the biggest reason I fear that our mask contest, which you can see at xprize.org/mask, a charitable venture that has brought 3M (MMM) and Honeywell (HON) and UnderArmour (UAA) among others to create a great mask, might fail.
We are still going to need masks, and we do have a long winter ahead of us. But I consider this moment not unlike when 6th and 8th armies of the United States were about to invade Japan in 1945, and instead we dropped atomic bombs and the war ended. Except we are probably still invading Iwo Jima, one more big battle, before we get there.
Nonetheless, the stock party deserved to be thrown, but not everyone got an invite. The winners, the Carnivals (CCL) , the retail real estate investment trusts, the casinos and the oils put up takeover like gains. I think they have all run too much short-term given that Pfizer is only ready with 50 million vaccines this year and 1.3 billion next year. But they are heavily shorted and the shorts justifiably panicked, given that many of the companies behind these stocks might not make it from this side of the Jordan River to the milk and honey on the other side.
I think that you should sell the real estate investment trusts, because we will not have growth in retail, in fact, I worry about the marginal retailers still -- or office skyscrapers, any time soon. I would dump the oils tomorrow because there is not a lot of upside with a new anti-fossil fuel president-elect, but hold travel and leisure, because we will not get reservations for the future, which can make them investable for certain. Only Chevron (CVX) and Pioneer (PXD) pass my muster.
The banks soared, because there's a belief that the economy is about to roar, causing rates to go higher, which would increase their earnings power. I think you could see a second-day run in these, if only because the analysts who like them will come out tomorrow and say they are undervalued. Then you can do some selling. The only ones I think are worth holding are Mastercard (MA) and Visa (V) , which truly benefit from international travel. I would add American Express (AXP) , but in one day it has already moved too much.
I think the airlines and the rails can rally more. A vaccine opens up travel and gives you places to go, something we have lacked. The rails simply can't be stopped now, and even Union Pacific (UNP) , which had a so-so numbers has seen its stock soar. The airlines may have several day moves given that they will no doubt be able to make it if we get a vaccine early next year.
The industrials have been running for weeks, like the rails, and they just tacked on more big gains. It's tough to figure out how much higher they can go. But if they have business with China, and it's been in the balance you can hold on. Hence, that's why I think that Boeing (BA) may be the best opportunity out there now, because if we get that vaccine widely distributed and the MAX jets get approved, the sky could be the limit, as I am going to tell members of the Action AlertsPlus.com club on my Wednesday 11:30 call. Companies that sell into Boeing will do well, too.
Now let's get tough: How about the Covid stocks, the ones that benefited from the stay-at-home theme? They are getting crushed and they should because one day we may not need them as much as we thought we would. What do we do with Zoom (ZM) or Peloton (PTON) ? Are Clorox (CLX) and Procter & Gamble (PE) done? Do we need to be in the full-service restaurants and sell the quick serves? Should we sell the essential retailers? How about tech?
I think you have to be prepared for a multi-day sell off, as investors take stock of huge gains. I think it's prudent to do so. But don't sell them all, as we still have virus battles ahead. Then we have to sift through them. Some shouldn't be sold for extraneous reasons: I wouldn't sell Apple's (AAPL) stock, because president-elect Joe Biden will no doubt restore the status quo that caused Apple to flourish in China.
But it's a lot tougher to embrace the stocks of companies involved with hygiene for the moment. I think they represent real value and we have forever changed our habits. But you have to let the pantry and cleaning product stocks come down, because the Pfizer news, as I mentioned, is like the atomic bomb, unexpected and still not fathomable to many. Toughest of all? Amazon (AMZN) and the companies that bring packages to you. I think Amazon's trading as if the pandemic would be lasting much longer, but it remains an incredible company that's a great deal. United Parcel (UPS) is ready with freezer farms, as we learned from CEO Carol Tome, and Federal Express (FDX) seems to be ready, too. I think you can buy all of these by the end of the week.
We might have had a rally from the certainty of an election, with the perspective that a defeated president might not be able to stay in the White House past Inauguration day. But the Pfizer news is a new chapter that justifiably took us to all time highs. Now, we see if the Covid winners that don't benefit from a Biden presidency, keep going down, while the others stabilize and the re-opening trade continues as it should given the welcoming and promising, incredible news from Pfizer and its partner BioNTech (BNTX) .