Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

A COVID-19 vaccine will mark a 'big top' for the stock market and end tech dominance, BofA says

A COVID-19 vaccine will mark a 'big top' for the stock market and end tech dominance, BofA says

A COVID-19 vaccine would mark the top in stocks and set the stage for a rotation from growth stocks into value stocks, Bank of America said on Friday. Technology stocks remain overbought even after Thursday's steep sell-off, and a composite index of five mega-cap tech names are trading 41% above its 200-day moving average, according to BofA. The massive gap between the composite index price and its 200-day moving average signals that any sustained correction in tech stocks could be extremely sharp. A sell-off in tech stocks also reflects investor "impatience" with the delayed passing of another stimulus bill from Washington, D.C.
While the economy is eager for a COVID-19 vaccine to be developed to enable a full reopening, investors in the stock market may have different feelings.

In a note published on Friday, Bank of America said a positive COVID-19 vaccine development would mark the "end of tech dominance" and is the missing catalyst for a rise in interest rates.

The technology sector has been leading stock market gains since the March 23 bottom, in part due to increased business as tens of millions of workers transitioned to remote work.

But another factor driving tech stocks higher has been near-zero interest rates, which lower the discount rate utilized for valuation-based investors and makes it more acceptable for rising valuations relative to other asset classes like bonds.

A COVID-19 vaccine would likely lead to a surge in economic activity, which would boost interest rates, leading to a surge in the discount rate and the relative valuation of tech stocks looking less attractive to other assets.

"[COVID-19] vaccine likely big top for credit and stocks and big low for value vs growth," BofA said.

A composite index of five mega-cap tech stocks created by BofA is trading 41% above its 200-day moving average, signalling that a sustained sell-off in tech stocks would likely be a sharp one.

The composite index is made up of Facebook, Amazon, Apple, Microsoft, and Google. At its peak in March of 2000, the Nasdaq index traded 55% above its 200-day moving average, so today's tech run has not yet exceeded the extremes of the dot-com era bubble.

A continued sell-off in tech stocks would likely reflect investor "impatience" with the delayed passing of another stimulus bill from Washington, D.C.

Still, stocks can continue to move higher, BofA conceded. An S&P 500 surge to 3,630 prior to the November presidential election remains possible, which would represent a 5% surge from Thursday's close.

The monetary policy from the Fed would be the main driver of stocks from here. "Historic policy shift underway at Fed, willing to let financial assets overshoot to stoke employment & wages and finance fiscal excess," BofA said.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
×