A “stock picker’s market” is likely to follow the successful roll-out of the coronavirus vaccine and any subsequent economic rebound, according to BlackRock strategists, who have identified three types of company that might thrive. 
Countries across the globe are working to vaccinate their populations against Covid-19, while keeping an eye on any mutations of the virus that could undo all this hard work. The success of the programme is critical for any resumption of ‘normal’ economic activity following a year of lockdowns.
A recent note by BlackRock Fundamental Equities co-chief investment officer Nigel Bolton said: “The immediate purpose of vaccination programmes is to lessen the severity of the disease and relieve the stress on public health systems, allowing lockdown measures to be lifted.”
He explained that the key vaccination milestones for recovery are ‘20-30-50’. Once 20 per cent of a population is vaccinated, then mortality rates start to come down; at 30 per cent, the number of intensive-care patients in hospitals should drop; and at 50 per cent, the pressure on hospitals will have fallen “significantly”.
Analysis by BlackRock suggests that the impact of vaccinations tends to filter through to the Covid data within about a month.
“Ongoing vaccine rollouts – combined with localised lockdown measures – means the data could improve enough for UK restrictions to be lifted around April, when we see a 50 per cent drop in hospital admissions, as shown in the chart below. Restrictions could ease slightly later in Europe given some problems with vaccine production,” Bolton said.
“The US sits somewhere between the two and varies by state. While only about 35 per cent of vaccines distributed in the US had gone into arms at the beginning of January, that number increased to 50 per cent by month-end. We see this improving further as rollout continues. Israel is the global leader in vaccinations and the impact on hospitalisations and other key trends is encouraging.”
BlackRock added that it sees “potential for more upside than downside” with the vaccination programme, noting that approval of the Johnson & Johnson and/or Novavax vaccines would provide enough total supply to cover developed markets by the end of 2021.
It added that the Johnson & Johnson vaccine is especially encouraging. It is administered in a single shot, which would rapidly speed up immunisation efforts, while trial data released at the end of January showed it has 85 per cent effectiveness against severe disease. Distribution could potentially begin in early March.
But what can investors expect once the vaccine rollout is complete? BlackRock believes we could see a “stock picker’s market” once the vaccine rollout is completed and economies start to open up in earnest.
“We expect an economic boom after Covid restrictions are lifted. Ample cash on the sidelines ready to be released, coupled with fiscal stimulus efforts in Europe and the US, should also bolster consumer spending,” Bolton said.
“We could experience a type of global, synchronized growth not seen since 2005. This means sectors and regions that have underperformed since the 2008 global financial crisis could take off – and some sectors that have enjoyed a stellar run may begin to lag.
“This, we believe, sets the stage for a stock picker’s market, one where differentiating between winners and losers will matter more to portfolio outcomes.”
Given this, BlackRock thinks there will be three kinds of stock that investors should keep their eyes on.
The first is ‘supply/demand winners’. “A strong economy would benefit companies that can rapidly speed up production to meet newly unleashed demand and raise prices as supply remains limited,” Bolton explained.
The asset management house sees opportunities in this theme emerging in the industrials, materials, chemicals and semi-conductor sectors, as supply is low and demand is high (in large part because of surging demand for electric vehicles) in this part of the market.
BlackRock’s second vaccine recovery theme is ‘travel & leisure beneficiaries’. Last year saw companies in these areas come under intense pressures as demand dried up because of widespread lockdowns and social distancing measures.
But Bolton said: “We believe consumer demand is set to soar in 2021 and into 2022 as restrictions are lifted and unemployment rates fall.
“People are eager to vacation and dine out in the company of friends. Restaurants should come out of the pandemic with improving margins and revenue. We also like the luxury companies poised to benefit from travel.”
The final theme identified by the fund management group is ‘the winners that can keep on winning’. Examples here include companies working in digitisation, e-commerce businesses and some of the Asian gaming companies – firms that have already enjoyed strong growth in recent years.
“This isn’t a normal recession, and that means many of the past decade’s winners can keep winning – and even benefit further from trends accelerated by the pandemic,” Bolton explained.
“[But] not all will keep pace, as demand was simply pulled forward for some products and services. Selectivity is key.”