What is the Market Outlook Amid a Second Wave of COVID?

globally exploded to kick off the week with the progress surrounding the most promising COVID-19 vaccines to date, developed by Pfizer, Moderna, and now AstraZeneca.
The news of multiple viable vaccines with over 90% effectiveness rate was a welcome development for markets, sending most indices soaring.
However, the release of vaccines for many are still months away and cases are expected to rapidly worsen meanwhile, prompting questions as to what the market outlook will be heading into year-end.
For most markets, the prospect of worsening cases has always been a concern, though countries floating actual returns to lockdown status is a game changer.
Stock markets in risk-on mode
Investors have been expecting positive news of COVID-19 vaccine for months, with Pfizer, Moderna, and AstraZeneca’s latest developments being well received. Still, even the most optimistic projections suggest the vaccine would not be ready for widespread distribution before Q1 2021.
In the more immediate term, COVID-19 cases are poised to explode with the onset of colder weather, leading to a surge in hospitalizations and likely fatalities.
US indices have been pointed higher despite troubling news coming out of Europe and the United States as record cases abound.
While the development helped provide a short-term boost for markets, is a sustained push higher in the cards?
US markets were given a dose of good news with the recent outcome of the election earlier this month which finally seems to be winding down. With the successful passage of the US election and no truly contested outcome, the single biggest seems to have been modulated for equity markets.
In particular, the likelihood of a divided US congress was also a lift for investors. This outcome could postpone or possibly derail any tax hikes, sweeping reforms, or other key tenets of the Democratic agenda.
By extension, a joint stimulus package seems likely, which is a huge positive for markets.
Is the COVID-19 Vaccine Priced In?
Looking ahead, many investors are wondering whether a COVID-19 vaccine was priced in, namely after the latest announcements.
Given the recent retreat off of highs as well as most expert projections, there likely appears clear market value ahead of an actual rollout of a vaccine.
Of course, this upside could be limited to specific sectors, namely small caps, energy, industrials, and materials, among others. It is worth noting that big tech has actually helped mitigate any recent boost across US indices.
More likely, markets will continue to cling to news surrounding the vaccine with any delays being seen as obvious net negatives, along with worsening spikes in cases.
December 10 is a key date to watch as the FDA will give its decision on emergency approval for vaccines.
The US for its part has been quite adamant in its stance against reimposing another lockdown, though this could change depending on the severity of future cases this winter.
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