A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.

US stocks reached record highs on Friday as Wall Street’s outlook becomes crystal clear: With Covid-19 vaccines on the way, investors expect the economy to undergo a spectacular rebound next year, sending shoppers on a spending frenzy and padding corporate profits.

Banks have issued a flood of 2021 forecasts reflecting this attitude, anticipating a sharp “V”-shaped recovery to take hold before long.

“Following encouraging early vaccine efficacy data, we remain confident that vaccines will be widely available by the second quarter of 2021,” UBS said in a report for clients titled “A Year of Renewal.” “This should help put Europe and the US on the path to a sustained recovery. Economic activity in China has “already largely normalized,” strategists added.

There’s certainly reason to be hopeful. Pfizer (PFE) has applied for authorization to distribute its coronavirus vaccine, and reports indicate that regulatory approvals are imminent. Biotech company Moderna (MRNA) intends to apply Monday for authorization for its vaccine candidate.

But with financial markets pricing in perfection, there’s little room for error. And plenty of real risks remain.

Shaky confidence: In many respects, the recovery is a confidence game, Berenberg Bank’s Holger Schmieding noted Monday. After spring lockdowns ended, spending recovered quickly. But Schmieding wonders: “What if consumers and businesses, twice bitten by the pandemic, stay much more cautious for much longer after the second wave than after the first?” “Unlikely,” he added, but it can’t be ruled out. Vaccine distribution: Creating safe and effective vaccines is the first step to returning to normal. But much will come down to distribution, which is susceptible to major logistical challenges, and take-up. Stimulus woes: Central banks have made clear they intend to keep their foot on the pedal, but the appetite for generous government spending — particularly in the United States, which has deferred fresh help since March — may be waning. Smaller aid packages could shake consumers when it matters most. Return of inflation: Low inflation has allowed central banks to provide unprecedented economic help. But if inflation spikes faster than expected next year, they could be forced into a tight spot. Economists don’t expect this problem to materialize in 2021, but they’re keeping close watch.

And all this says nothing about the lingering effects of a difficult winter, which could feed unemployment and deepen scarring for vulnerable businesses like restaurants, hotels and airlines.

Bank of America notes that a lot of bullishness on vaccines is already priced in. Its strategists think stocks are still the place to be — not least because low-yielding bonds look like a lousy alternative — but point to vaccine execution and delayed stimulus as potential speed bumps.

“Disappointment around vaccine success, distribution timing, cold weather case counts, and stimulus gridlock could pare this optimism,” they told clients last week.

Traffic plunged at stores on Black Friday

Foot traffic nosedived at stores on Black Friday because of the pandemic.

Traditional brick-and-mortar stores saw a 52% drop in Black Friday visitors compared to last year, according to a report from Sensormatic Solutions.

Shopping traffic on Thanksgiving Day dropped by 95% as many stores closed to give their employees time off and to avoid crowds, my CNN Business colleague Shannon Liao reports.

Online shopping fared better — solidifying the growing importance of internet sales to struggling retailers.

Customers spent $9 billion on Black Friday, per Adobe Analytics, up nearly 22% from last year. That’s the second biggest day for online spending ever.

Even when customers visited stores, it was often to pick up items they had purchased online. In-store and curbside pickup increased 52% this year, Adobe said.

“What we’re seeing this year is $1 out of every $4 this season is being spent online. And that’s a marked increase from last year when it was about $1 out of every $5,” Adobe’s senior digital insights manager Vivek Pandya told CNN Business. “That’s additional billions of dollars that are being migrated online. And that’s being done in a very short period of time because of the pandemic.”

Watch this space: Online shopping records could be shattered by this Cyber Monday, with spending expected to hit $10.8 billion.

The National Retail Federation predicts that despite a tough economic environment, holiday sales will grow by between 3.6% and 5.2% compared to last year, to more than $755 billion. The question is whether all stores will benefit from that level of activity — or just those with a big internet presence.

S&P Global and IHS Markit to merge

S&P Global is buying IHS Markit for $44 billion in stock, combining two of the world’s premier providers of financial information.

S&P Global is one of the leading providers of credit ratings, analytics and indexes used to assess the global financial markets. It provides a leading index of US home prices as well as the bellwether S&P 500 (SPX) market index and the Dow Jones industrial average.

IHS Markit offers analytics and economic measures, particularly the surveys of purchasing managers in different nations around the globe that are closely watched by economists.

The deal shows the growing importance and value of financial data firms to global financial markets. Other major players in the field include Bloomberg, FactSet and Refinitiv.

Up next

Zoom (ZM) reports earnings after US markets close.

Also today: The Chicago Purchasing Manager Index for November posts at 9:45 a.m. ET.

Coming tomorrow: Fed Chair Jerome Powell and outgoing Treasury Secretary Steven Mnuchin testify before the Senate Banking Committee.

[Read More…]