Yesterday’s monster stock market rally is cooling off this morning. After putting in the best performance in six weeks, Dow Jones Industrial Average (DJIA) futures point to a lower open on Tuesday.
The excitement of Moderna’s breakthrough coronavirus trial quickly fizzled out as health experts delivered a harsh dose of reality. Speaking to Bloomberg this morning, Jennifer Rohn of University College London said, bluntly, that no vaccine will be ready fast enough to prevent a second wave.
It’s not a question of whether there’ll be a second wave. There will be one… The vaccine is at least 18 months, two years away.
It’s a bitter pill for stock market bulls who are sending stocks higher on every vaccine development. As Fidelity’s Jurrien Timmer explained, the stock market – at current levels – isn’t fully pricing in a second wave yet.
[At this value, the stock market is] betting on a recovery but is hovering, awaiting further information, such as will there be a 2nd wave of Covid-19 as states start reopening?
Dow futures struggled to hold onto yesterday’s gains with the index dripping 34 points lower (0.13%) in early morning trading.
Rohn, who is a principal research fellow in the field of cell biology at UCL, struck a downbeat tone. Despite stock market optimism over re-openings and vaccine trials, she said “this is really not the end.” Quite the opposite. We’re just at the beginning.
But what about herd immunity and antibody testing? Asked whether the virus had spread sufficiently through our communities already, as some studies argue, she said no.
The news isn’t great actually. Only about one in ten people have been exposed to this virus, which leaves of course a whopping 90% of people vulnerable.
That leaves the prospect of a second wave very high. Rohn said the scale of the second wave will depend on how well governments implement testing and contact tracing.
If yesterday’s Moderna rally gives you a feeling of de ja vu, that’s because stocks did the same thing when Gilead released positive data about the Remdesivir trial earlier this month. We saw a huge rally, followed by a slow bleed lower again.
Both are positive developments, but neither is a magic bullet. As Rohn pointed out, the remdesivir drug is promising, but it only cuts down hospital stays by a couple of days. “It’s better than nothing,” she said.
The Moderna development is similarly promising, but will take months of further development. Even the most optimistic timeline means the Moderna vaccine won’t be available until the end of the year. And not at scale for many months after.
Geo-political relations also took a turn for the worse last night. The World Health Organization’s annual meeting ended in a cloud of uncertainty yesterday as Donald Trump took aim at the group. He accused WHO director Dr Tedros Adhanom of cozying up to China through the Covid-19 pandemic. And he threatened to cancel U.S. membership.
I cannot allow American taxpayer dollars to continue to finance an organization that, in its present state, is so clearly not serving America’s interests.
The move threatens to reignite tensions with China which have ratcheted up since the coronavirus outbreak.