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ETFs to Play as Vaccine News Looks to Outdo Virus Fear

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After almost a year-long wait, the month of November started delivering sweet surprises to investors in the form of back-to-back vaccine news. Pfizer Inc. (PFE - Free Report) and BioNTech SE (BNTX) have already come up with an encouraging update on their coronavirus vaccine candidate, BNT162b2, which reflects an efficacy rate of 95%. Moderna (MRNA - Free Report) also said that its vaccine was more than 94% effective in preventing the virus.

Now comes the third good news from AstraZeneca (AZN - Free Report) which said that its vaccine, developed in collaboration with the University of Oxford, was evaluated over two different dosing regimens. “One showed an effectiveness of 90% when trial participants received a half dose, followed by a full dose at least one month apart. The other dosing regimen showed 62% efficacy when given as two full doses at least one month apart,” per CNBC. Overall, it showed an average 70% effectiveness.

AstraZeneca conducted the trials in more than 23,000 volunteers in the U.K. and Brazil, with more data to be collected from all over the world in the coming weeks. Additional data could change the results regarding its average efficacy, and help to determine the duration of the protection.

If this was not enough, the National Retail Federation (NRF) announced that holiday sales during November and December will rise between 3.6% and 5.2%, based on some of the pent-up demand. Against this backdrop, below we highlight a few ETFs that are set to gain in the near term on strengthening vaccine hopes.

iShares U.S. Oil Equipment & Services ETF (IEZ - Free Report) – Up 8.9% on Nov 23

The coronavirus-led global slowdown weighed on oil demand. Mounting concerns over the second wave of coronavirus cases have threatened demand further in recent sessions. This is especially true as the major parts of the Europe like Germany, France and the U.K. are under lockdown now. Citi recently slashed its 2021 Brent and West Texas Intermediate crude price outlook by $5 to $54 and $49, respectively. In such a scenario, any positive update on vaccine has every reason to boost the energy sector.

SPDR S&P Bank ETF (KBE - Free Report) – Up 1.8% on Nov 23

Banking stocks have been rather beaten down in the past few months as fears of higher defaults at the household and corporate levels hit the space hard due to the economic slowdown. So, banking stocks are offering value now and have found room for growth. 

Invesco S&P 500 High Beta ETF (SPHB - Free Report) – Up 4.0% on Nov 23

Vaccine optimism (which indicates return to economic normalcy) and a divided congress (which indicates the likely status quo on policy matters) mean a steady rally in stocks. Both factors fueled Wall Street in recent sessions and will likely to do so in the coming days.

Vanguard High Dividend Yield Index Fund ETF Shares (VYM - Free Report) – Up 1.3% on Nov 23

If risk-on sentiments continue for some more time, we will end up seeing in an uptick in treasury yields. In this kind of scenario, betting big on a product that offers benchmark-beating returns would be an intriguing option.

SPDR S&P Retail ETF (XRT - Free Report) – Up 3.7% on Nov 23

NRF noted that the retail sector has witnessed a V-shaped recovery as the aggregate retail sales grew both sequentially and year over year each month since June. For the first 10 months of this year, retail sales were up 6.4% versus the first 10 months of 2019, per NRF.

iShares Morningstar Small-Cap Value ETF – Up 3.2% on Nov 23

Vaccine news and stimulus hopes in the holiday season should be great news for the small caps. Notably, on Nov 19, Treasury Secretary Steven Mnuchin “asked the Federal Reserve to shut down five emergency COVID-19 relief facilities and return $455 billion of unused funds, a move opposed by Fed Chairman Jerome Powell.”

In March, the Congress had approved a $2.2 trillion of emergency relief under the CARES Act, which included $500 billion to enact a variety of emergency lending facilities through the Fed and guarantee loans. Out of this, only a trivial portion of the funds — $25 billion — were used. Now Mnuchin wants to discuss a stimulus package with Democrats. Probably the unused funds will help them come up with a stimulus package. This could be a winning factor for the small caps.

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