as Kindleberger demonstrated in his analysis of bubbles, the one key factor which bursts bubbles is the beginning of the removal of cheap money. In early 2000, that occurred when Greenspan started to withdraw the extra repo liquidity put in because of Y2K concerns. Yesterday’s vaccine announcement and the back-up in bond yields, could be today’s equivalent. 

Europe
This vaccine is in many ways a European product: It was aided with an injection of German government funds, and BioNTech SE was founded by two Turkish migrants to Germany. And it has had an even bigger impact in Europe than in the U.S. This, incidentally, argues that we shouldn’t dismiss what is going on as merely an exit from FANGs. 

In the following charts, Lapthorne of SocGen looks at the total dispersion of daily returns in the U.S. on the left and Europe on the right, over the last three decades. In the U.S., Vaccine Monday still ranks behind the historic dislocations of the dotcom bubble and Lehman — and the onset of the Covid-19 shock in March. In Europe, Vaccine Monday saw greater dispersion than anything bar the worst day in March:

This happened even though European yields famously have a lot of room to rise. This is the German yield curve; it is as flat as a pancake, and has been with minor interruptions since the middle of last year — but it is currently at the steepest end of its recent range. If the European bond market were to start placing bets on a full-blooded move into reflation, then we would have a true Rotation on our hands:

 For another example, of how big a deal Vaccine Monday was for the European stock market, this next chart from Lapthorne shows the degree of negative correlation between prior 12-month returns, and returns on Vaccine Monday. The worse a stock had done over the previous year, the better it did, to a far greater extent than had ever been seen before. The chart on the right shows the strength of the correlation, and shows that on this measure, this was the most powerful rotation in three decades, roughly twice as powerful a turnaround as anything that had preceded it:

 Lapthorne also shows that European value stocks outperformed quality stocks to the greatest extent in a single day since measurement began in 2002: