Dow and S&P 500 hit record highs on vaccine progress — Here's what experts are watching

The Dow Jones Industrial Average and S&P 500 hit records on Monday following a report of progress in developing a Covid-19 vaccine.

Pfizer and BioNTech said the trial, split between people who were vaccinated and those who received a placebo, indicated a vaccine efficacy rate of above 90% at seven days after the second dose.

Here's what six experts say they're watching and how they're investing in this market.

David Zervos, chief market strategist at Jefferies, says the economic recovery is turning a corner.

"What's really interesting about the price action is that we're starting to see the dollar move with stocks in a different correlation pattern. Something we've highlighted to clients a lot: When you get a real recovery, the dollar tends to go up when stocks go up, as people start expecting higher real returns on capital in the economy as opposed to the Fed being a driver and driving real rates down and the dollar weakening and that pushing stocks up. So that handoff from the Fed to the real economy, you can see it through the currency markets, and it's a really interesting feature of what we're seeing today. We're seeing the weakness in gold as well but I think that's an important thing to watch today and very encouraging that we're really turning corners in an important way."

Lee Baker, president of Apex Financial, says markets are cheering newfound clarity.

"Clearly this is great news but there's still questions. What does the distribution of this vaccine look like once it's gotten beyond the next phase? … People are concerned about volatility and the 'what ifs.' Well, here in the matter of about three days we've cleared two big 'what ifs.' The first big 'what if' [is] clearly the outcome of the presidential election here in the United States. But then to hear this morning 90% effectiveness on this vaccine, that's a big sigh of relief for people clearly here in the United States but also around the world."

Mohamed El-Erian, chief economic advisor at Allianz, is watching the bond market.

"It is great news, and it reflects light at the end of a very long tunnel. And I'm fascinated not only by the way the stock market is reacting, which is to favor the 'go back to work,' but look at the bond market. The bond market is giving you a fairly interesting signal — the notion that the U.S. will recover much more quickly than Europe because of the internal strength of the U.S. economy. So you're getting very consistent signals across different segments of the marketplace.

Jim Cramer, host of CNBC's "Mad Money," is backing the reopening trade.

"You can try to figure out exactly how many Nasdaq stocks can rally on this, and they are surprisingly few because you get the cloud stocks, they're not beneficiaries of this. … You have a couple stocks that are obviously related to [President-elect Joe] Biden and China, those are good. … I would feel much more comfortable buying an airline stock up 10% than I would buying a cloud stock down 5%."

Stephanie Link, chief investment strategist and portfolio manager at Hightower, applauds the positive news.

"This is a remarkable day. We're chipping away at the uncertainties. Ninety percent effective versus Dr. [Anthony] Fauci saying 50% to 60% would have been acceptable. Fifty million doses are going to be produced this year, going to 1.3 billion doses next year. This is remarkable. So now you have the election sort of certainty there, right, we think, and now you have this certainty. So we're chipping away. This is very positive. I still think you want to have a barbell, you take advantage of some of these secular technology stocks that are going to get hit today because of the total addressable market strength that these companies have, but you also want to own cyclicals because you have enormous fiscal and monetary policy. … We're going to get more fiscal, and you're also getting better economic data. Last week we got a lot of good economic data that people ignored."

Robert Johnson, founder and chairman of The RLJ Companies and founder of BET, says relief for the African American community needs to be twofold.

"As you well know, Black Americans were disproportionately impacted by the Covid virus … So for Black Americans to hear that there is a possible vaccine within several months or so, it's got to be something that is going to give them a lot of hope for the future. But combined with the Covid vaccine, you want to be healthy and well, but you want to be also economically growing and vibrant and generating income and wealth for yourself and your family. So I think that the country should definitely focus on how on the macro level the Covid vaccine is going to drive the economy, but for the same reason that Blacks were disproportionately affected by health care, lack of health care, disproportionately affected by lack of access to capital. So that should be a priority to go along with mobilizing for the vaccine. The incoming administration, President-elect Biden, needs to focus on bringing the black businesses that again suffer disproportionately up to where they can compete and be effective and move toward closing an enormous income and wealth gap."


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