Yesterday, overnight Aussie time, the Dow Jones Industrial Average (INDEXDJX: .DJI) closed at a new all-time high of 29,950 points.
That’s within a whisker of the psychologically significant 30,000-point mark. And it’s 61% up from the 23 March lows.
While not setting new records, it’s the same story across the globe with every major share index closing well into the green. At the time of writing in our neck of the woods, my screens are also flashing green across Asia and Australia.
With trading back on after yesterday’s embarrassing shutdown, the S&P/ASX 200 Index (ASX: XJO) is up 0.4%. While that’s still 9% below the ASX 200’s all-time high set on 20 February, there are reasons to be optimistic that record could also soon be topped.
Not 1 but 2 vaccines
In the space of a week, our pandemic-battered world received news of not 1, but 2 highly promising coronavirus vaccines almost ready to be rolled out to the masses.
This morning, we learned of the even better results reported by Moderna Inc (NASDAQ: MRNA). According to its late-stage trial, Moderna’s vaccine is 94.5% effective at preventing infections.
Of course, that doesn’t mean we’re out of the woods yet.
Infection rates are still sky-high in the United States, Europe and much of the rest of the world. And I might add I’m writing from my home office in South Australia, where new cases have seen our state cut off from most of the rest of the nation.
But with 2 new vaccines casting their light at the end of this viral tunnel, share market investors have good reason to look through the shorter-term pain still ahead to the potentially outsized rewards on offer as Australia and the rest of the world reopen.
According to Seema Shah, chief strategist at Principal Global Investors (as quoted by Bloomberg):
Today’s vaccine news should make investors more tolerant of the surging virus cases, permitting them to look through to the strong dynamics that seem to be taking shape for 2021. Easy monetary policy, fiscal stimulus, recovering economic growth – there are many reasons for investors to be optimistic as we move closer to the end of this awful year.
Among those expressing renewed optimism for 2021 is Federal Reserve vice chair Richard Clarida. Clarida says his forecasts for 2021 had already included his belief in a vaccine, but over the past week he’s “got more conviction” (quoted by Bloomberg):
The news has been very good to have now two successful trials with above 90% efficacy… I’ve got more conviction in my baseline for next year and more conviction that the recovery from the pandemic shock in the U.S. can potentially be much more rapid than it was from the global financial crisis.
As we’ve witnessed in Australia, Clarida notes that government stimulus spending and employment support packages, along with low interest rates and people spending less money during lockdowns and social distancing, have seen US consumer savings rates reach near record levels.
Fiscal policy was so successful that this was the only downturn in my professional career in which disposable income actually went up in a deep recession, and a lot of that has been saved…
We will continue to monitor developments and assess how our ongoing asset purchases can best support achieving our maximum-employment and price-stability objectives.
According to Bloomberg, Morgan Stanley strategists are also bullish on the outlook for shares and credit in 2021, citing an expected V-shaped economic recovery, continuing support from governments, and increased clarity on the vaccine rollout. “This global recovery is sustainable, synchronous and supported by policy, following much of the ‘normal’ post-recession playbook. Keep the faith, trust the recovery.”
Years of progress in a matter of months
While the pandemic has caused economic hardship and the tragic loss of lives, it’s also forced societies to innovate at an accelerated pace.
Here in Australia, that’s seen our adoption of digital technologies go into overdrive.
Speaking at the CEDA annual dinner in Sydney, Reserve Bank governor Philip Lowe noted that (from the ABC):
In some areas, progress that otherwise would have taken years has been made in a matter of months. The combination of necessity, new technologies and the easing of regulations has made a real difference.
Digitalisation is not only helping Australians deal with the pandemic, but it will also boost productivity and can help drive future economic growth…
Reflecting this, online retail sales have increased by 80 per cent since the start of the year… This acceleration in the shift to a more digital economy is prompting firms to innovate and to find new ways of doing things.
One company that’s benefited from this rapid shift to a more digital economy is online retailer Kogan.com Ltd (ASX: KGN), which has certainly done its bit to help nudge the ASX 200 back towards new record highs.
Year-to-date Kogan’s share price is up 156%. And since the wider ASX 200 bottomed on 23 March, Kogan’s shares have gained 367%.
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Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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