The Motley Fool

Breaking: Bank of Canada Thinks New Vaccine May Create Stock Market Spike

Image source: Getty Images

The Bank of Canada thinks there may be light at the end of the tunnel. After a difficult 2020, Canadians could get a huge boost in 2021. That’s due to unexpectedly good vaccine news.

“In late October, the bank said it assumed a vaccine would not be widely available until mid-2022,” explained VOA. “Since then, several manufacturers have announced potential vaccines that could be distributed starting early next year.”

Bank of Canada Governor Tiff Macklem thinks this is the missing piece to a swift economic recovery. “It is possible, especially when there is a vaccine, that households will decide to spend more than we have forecast, and if that happens the economy will rebound more quickly,” he said.

If the economy stabilizes, it could set the stage for another stock market surge. Here’s how to invest.

Avoid these stocks

If there’s another stock market surge, don’t expect all companies to benefit. A return to normal sometime in 2021 still won’t be enough for some businesses to thrive.

Consider Air Canada (TSX:AC). If a vaccine is widely distributed, expect passenger traffic to pick up quickly. Demand is still 90% below 2019 levels, so there’s plenty of room for improvement.

The only problem is that airlines need much more than a boost; they need a dramatic turnaround. That’s because these businesses don’t turn a profit unless they’re flying close to full capacity.

Now flying at 10% of capacity, Air Canada is burning roughly $1 billion every 90 days. Losses will narrow significantly if the economy rebounds next year, but you should still expect losses.

Even with the most optimistic assumptions, demand will still be 10-20% below 2019 levels. One airline CEO thinks demand will remain permanently smaller.

All of this means Air Canada will have enough planes for a 2019 world chasing a smaller number of customers. That’ll result in heavy competition, low capacity utilization, and continued losses.

This stock might rebound if the world returns to normal next year, but it won’t have nearly as much upside as the stocks below.

Go beyond Canada

If the world rebounds in 2021, you won’t want to limit yourself to a single country. You want to bet on the world as a whole.

Stocks like Shopify (TSX:SHOP)(NYSE:SHOP) allow you to do this. The company’s e-commerce platform is available from anywhere in the world. The business was founded in Canada, but its future is global.

If the economy surges, and consumers regain confidence, expect discretionary spending to skyrocket. That’ll directly benefit Shopify. And because this company operates on a global basis, you won’t be limited to a single recovery — you can profit from them all.

Shopify isn’t the only company that can help your portfolio expand beyond Canada. There are dozens of suitable options, but the majority are in the technology space.

Whether it’s the internet of things or 5G, the same technologies are taking over economies around the world. These are billion-dollar opportunities that will create value, even if the economy doesn’t rebound next year. Stack the odds in your favour by betting on tech stocks.

Speaking of good tech stocks...

Motley Fool Canada Makes 5G Buy Alert

5G is one of the greatest arrivals in technology since the birth of the internet. We could see plenty of new wealth-building opportunities in 2021 that would potentially dwarf any that came before them.

5G has the potential to radically change our lives and society as we know it, but if you’re an investor, the implications are even greater — and potentially much more lucrative.

To learn more about it and its revolutionary potential to change the industry — and potentially your bank account — click on the link below to get the full scoop.

Learn More Today!

Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. Fool contributor Ryan Vanzo has no position in any stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.