A successful coronavirus vaccine could spark a sell-off of bonds and a rotation out of tech and into cyclical stocks, says Goldman. This according to a recent article in Bloomberg.
In a recent note, Goldman strategists argued that the approval of a vaccine, currently underpriced by equity markets, could “challenge market assumptions both about cyclicality and about eternally negative real rates,” adding that such a landscape could support steeper yield curves while challenging the leading position held by tech stocks. The team contends that such a scenario, combined with a potential administration change, could benefit emerging market equities if “trade policy risks diminish while U.S. tax risks rise.”
While Goldman suggests it may be too early for investors to aggressively position in anticipation of such a shift, it recommends options trades as one approach. The team maintains a bearish view on the dollar, noting, “The range of outcomes is wide and our highest confidence is still in ongoing U.S. dollar weakness.”
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