Tuesday,
November 17, 2020

Market recap

Dow Jones

29950.44

470.63 (1.60%)

S&P 500

3626.91

41.76 (1.16%)

Nasdaq

11924.13

94.84 (0.80%)

Moderna

$98.16

$8.56 (9.55%)

Nestlé

$115.15

-$1.54 (-1.32%)

Beyond Meat

$127.15

$2.41 (1.93%)

Amid evolving news + uncertainty surrounding COVID-19, your financial needs are our top priority. For more information on COVID-19 and your finances click here.

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Top Story

Vaccine Monday: Moderna's Candidate Proves Effective

Vaccine Trial Shows Shot is 94.5% Effective

Yesterday, Moderna (MRNA) shared that its experimental COVID-19 vaccine proved 94.5% effective in its most recent trial. In the study, which involved 30,000 participants, 95 people developed symptoms of COVID-19. Researchers reported that 90 of those participants had received the placebo, not the real vaccine, showing that the shot is effective at protecting against the virus.

More safety-related data from the study will be released later this month, though the vaccine did show promising signs of being safe as well as effective. If this data proves the shot is safe, Moderna will ask federal health authorities to clear the vaccine by early next month. If this process goes smoothly, Moderna’s vaccine could be ready for distribution before the end of the year.

COVID-19 Cases Spike

COVID-19 cases are surging in many parts of the world. Last Friday, new infections in the US were above 177,224—a new daily record. Hospitalizations are also hitting record highs, though death rates for people contracting the virus are down thanks to new treatment methods.

Many states have recently implemented new mask mandates and restrictions on gatherings to curb the spread of the virus. The state of Wisconsin and the city of Chicago put stay-at-home advisories in place. The state of Vermont banned gatherings of people from different households. Though this next wave of the virus is straining the healthcare system and the economy, vaccine trial results are providing some much-needed good news.

A Light at the End of the Tunnel

In addition to Moderna, other companies are also hard at work developing vaccines. Last week Pfizer (PFE) and BioNTech (BNTX) shared that their COVID-19 vaccine proved 90% effective at protecting trial participants from the virus. The two companies plan to ask the FDA to authorize the shot this month, which could mean it will also be ready for distribution by the end of the year. AstraZeneca (AZN), Johnson& Johnson (JNJ), and Novavax (NVAX) are also developing vaccines, and could share news from their trials soon.

The pandemic is far from over and this wave of cases could prove even more difficult than the first wave. However, positive news from Moderna and other companies are providing hope for the future.

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Demand for Baby Products Is Down

Falling Birth Rates Mean Lower Demand for Diapers and Formula

Recent data shows that the COVID-19 pandemic is causing people to have fewer babies. Analysts predict that this year the US birth rate will fall by 300,000 to 500,000—a much higher decline than the 44,172 drop seen last year. In China, the birth rate is expected to be 8% lower this year, double the decline seen last year. In 2016 China ended its one-child policy after 40 years, but after an initial spike, birthrates in the country have been falling over the past four years.

Fewer new babies means lower demand for diapers, formula, and other baby products. This is impacting companies like Reckitt Benckiser (RBLY), which owns formula brand Enfamil, as well as Nestlé (NSRGY), which makes formula and owns baby food company Gerber. Procter & Gamble, which owns the diaper brand Pampers, Kimberly-Clark (KMB), which owns Huggies, and other diaper makers are looking toward what could be a period of low demand for their products.

Companies Respond

Birth rates were already falling before the pandemic, and companies supplying baby products were finding ways to adapt. Now this trend is being accelerated. In countries like China and the US, many families are having fewer children but spending more money per child.

In response to this pattern, companies are selling more upscale formula for babies with specific nutritional needs. Similarly, Pampers and other companies are making specialized, more expensive diapers. Some are made out of sustainable materials, while others offer specific styles and fits. Companies are also expanding their offerings and making supplements for babies as well as their new mothers. Additionally, as the population ages, some companies are pivoting and creating nutritional supplements for elderly people.

Looking Ahead

Baby-centric brands have dealt with falling birthrates and subsequent drops in demand for their products before. Between 2007 and 2009 families had fewer children because the labor market was suffering. This seems to be the case in 2020 as well.

Looking ahead, some analysts predict the birthrate could stay low in the US for several years, even if the labor market strengthens.

A low birth rate impacts sales of baby products first, but then as a smaller generation of children grows up, sales of toys, educational products, and eventually products for young adults are impacted. A lower birth rate this year could have long-lasting effects on the economy.

The Best-Performing Large Stock in Europe

Ayden’s Shares Surge

Ayden, (ADYEN:NA) a Dutch payments company, has seen demand for its services surge as a result of the ecommerce boom. Shares of Ayden have climbed almost 120% this year, making it the best-performing large stock in Europe in 2020.

The company’s market value has reached almost $60 billion—higher than many of Europe’s large banks, including USB Group AG (USB). Ayden also outperformed other digital payment companies which have seen growth during the pandemic, like PayPal (PYPL).

The Technology Powering Digital Payments

Ayden builds the technology that companies use to process credit card and other digital payment methods. Big names like Uber (UBER), eBay (EBAY), Microsoft (MSFT), and others use the company’s payment processing tools. The company is less flashy and consumer-facing than digital payment systems like PayPal and Venmo, but it is an important part of the growing digital payments landscape.

About 90% of Ayden’s business comes from transactions that happen online as opposed to in a store. This has made the company attractive to investors who have watched ecommerce gain popularity during the pandemic and believe that many consumers will stick to their online shopping habits even after the pandemic.

Cash Payments Are Down

Positive news from vaccine makers has caused Ayden’s shares to dip slightly as investors contemplate how a return to normalcy would impact consumer habits. However many believe that Ayden is well-positioned for growth regardless of how a vaccine impacts the economy.

Even if and when consumers return to doing more in-person shopping, they are likely to use digital payment systems more than they did pre-pandemic. In 2019, an estimated 69% of all global transactions were done in cash. This year, that number is expected to be about 64%. That drop is four or five times higher than the shift from cash payments to digital payments seen in a normal year. Analysts expect more ecommerce and less cash payments at brick-and-mortar stores even after the pandemic, which are both good for Ayden.

The company reported a 27% jump in revenue during the first half of 2020. Investors are eager to see how Ayden will perform during the holiday shopping season and beyond.

Not-So-Breaking News

  • Beyond Meat (BYND) plans to debut two new versions of its meatless burger in early 2021. The company’s products have become hugely popular this year. However, Beyond has faced some criticism from dietitians for marketing its products as being substantially healthier than red meat. The new burgers will respond to this feedback by offering two versions of the company’s plant-based burger with much less saturated fat than a beef burger.
  • Home Depot (HD), the world’s largest home improvement chain, is paying $8 billion for HD Supply Holdings (HDS), an Atlanta-based tool and supply distributor. HD Supply’s shares spiked 24.25% on news of the acquisition.
  • The Spanish bank BBVA (BBVA) has decided to sell its US operations to PNC Financial Services Group (PNC) for $11.6 billion. This is the second-largest US banking acquisition since the financial crisis in 2008.
  • Virgin Galactic (SPCE), the space tourism company, announced that its next test flight will be postponed indefinitely due to COVID-19 restrictions in New Mexico where the flight was scheduled to take off in late November. Shares of the company fell about 10% on the news.
  • Two mall owners, Taubman Centers (TCO) and Simon Property Group (SPG), have revised their merger terms, avoiding what could have been a difficult legal battle. Before the pandemic, Simon, the country’s largest mall operator, had agreed to buy Taubman for about $3.6 billion. Under the new deal, the price tag on Taubman’s mall locations will be about $800 million lower.
  • Having a baby is expensive. How do you transition your household budget as you prepare to grow your family? Read How to Budget for a Baby on SoFi Learn for some tips.

Financial Planner Tip of the Day

“Figuring out how much money should be in your emergency fund is a fundamental step in building your financial plan for the future. Conventional wisdom says you should have between three months and six months’ worth of expenses set aside for an emergency, but the exact amount for you depends on your financial situation.”

Brian Walsh, CFP® at SoFi

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