Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

An apparent breakthrough in a coronavirus vaccine weakens the case for another large U.S. fiscal stimulus bill, but relief is still needed for struggling businesses to create a bridge for the economy, investors said.

Pfizer Inc.’s announcement that its vaccine was more than 90-per-cent effective in tests come as Senate Republicans and House Democrats are in a standoff over the health of the economy and investors are closely watching any movement over talks.

Democrats have pushed for a US$2-trillion package, with support for state and local governments that are facing steep layoffs, but Senate Majority Leader Mitch McConnell has pushed back, arguing Congress should enact a smaller coronavirus stimulus package highly targeted at the pandemic’s effects.

Story continues below advertisement

“You have to assume in general that whatever level stimulus you would have received will probably be less because policy makers will say that the economy will mend,” said Jonathan Golub, chief U.S. Equity Strategist for Credit Suisse.

The vaccine news came after the United States became the first country to cross more than 10 million coronavirus cases on Sunday, according to a Reuters tally.

New Jersey joined some other U.S. Northeast states on Monday by reimposing economic restrictions such as closing indoor dining by 10 p.m.

Mohamed El-Erian, chief economic advisor at Allianz SE, the corporate parent of PIMCO, cautioned that stimulus relief was still required to minimize the pandemic’s economic and social effects. The “inclination is to argue that the fiscal support is no longer needed. That would be wrong,” he tweeted.

Talks for another stimulus bill will likely be affected by polls for two open U.S. Senate seats at play in the Jan. 5 run-off elections in Georgia, said Esty Dwek, head of global macro strategy at Natixis Investment Managers, who cautioned that the U.S. economy remains weak.

“Even with a vaccine we need stimulus,” she said, adding that the risk is that any further relief bills will “be about politics and not about need.”

LESS DEPENDENT ON STIMULUS

While another stimulus bill would likely extend the market rally, the lack of a relief package now will not sink stocks or investor sentiment as much as before Pfizer’s news, said Lamar Villere, portfolio manager at Villere & Co.

Story continues below advertisement

“The downside risk of what does a world looks like in a no-stimulus scenario is frankly less disastrous to the market than it was yesterday,” he said. “We now appear to have blue skies ahead if all of this is as positive as it looks.”

As investors moved into riskier assets on Monday, stocks hit record peaks while benchmark 10-year Treasury rates jumped to their highest since March, when the U.S. economy froze under lockdowns to prevent the spread of the virus.

Expectations for an imminent vaccine will likely push interest rates higher as investors price in an economic rebound next year, said Jabaz Mathai, head of U.S. rates strategy at Citigroup, wrote in a note Monday. “Nevertheless, a stimulus package would be ideal to create a bridge for the economy.”

Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago, said a vaccine reduced the need for a stimulus but said if it was not available to the general public until March or April, “we might need something to bridge that.”

Markets could continue to rally even if new stimulus is pushed to next year, said Anwiti Bahuguna, head of multiasset strategy at Columbia Threadneedle. A stimulus bill will now likely range from US$500-billion to US$1-trillion, rather than the US$2-trillion plus that Democrats had been pushing for, she added.

“People were rightly staying away from certain sectors” like hotels and travel, she said. The market’s broad rally Monday “implies that rotation trade is on.”

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies