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WHO Coronavirus Warning Could Wreck Stock Market Risk Rally

Last Updated September 23, 2020 1:53 PM
W. E. Messamore
Last Updated September 23, 2020 1:53 PM
  • The WHO recently warned re-infection by coronavirus is possible.
  • The CDC remains confident a second wave will hit later this year.
  • The exuberant stock market rally could suddenly unravel.

The World Health Organization warned Friday that COVID-19 patients might not be immune to a coronavirus “second infection.” Consequently, the extraordinary stock market risk rally since Mar 23 may crash and burn to price in the new danger.

On Friday, the WHO published a statement regarding the usefulness of “immunity passports” to mitigate coronavirus while opening the economy. Since Dr. Anthony Fauci said immunity cards were under discussion , the idea has been a source of controversy. Some worry immunity passports will create a new category of privilege , a kind of medical apartheid.

But for the World Health Organization, the main concern is they wouldn’t be effective anyway. The WHO says it’s not at all clear that people can develop immunity to coronavirus after recovering from an infection. Therefore coronavirus could reinfect people who’ve already had it :

There is currently no evidence that people who have recovered from COVID-19 and have antibodies are protected from a second infection.

Moreover, there is evidence people who have recovered from COVID-19 have suffered from a second infection. There have been 111 such cases in South Korea as of Apr 12 . But experts told TIME Magazine it’s possible that the tests picked up a lingering first infection  after a false negative test. Even so, the stock market rally is whistling past a graveyard.

A Second Coronavirus Wave Could Shock Equities

In addition to the potential danger of reinfection, a second wave of new coronavirus infections looms. The nation’s top health experts are confident there will be a second wave of coronavirus in the fall and winter months. The booming stock market rally since Mar 23 doesn’t seem to be pricing in this risk. The CDC director says the second wave could be more devastating :

There’s a possibility that the assault of the virus on our nation next winter will actually be even more difficult than the one we just went through. And when I’ve said this to others, they kind of put their head back, they don’t understand what I mean.

California hospital chain Dignity Health’s chief medical officer says there will “definitely” be a second wave . The simultaneous occurrence of a second coronavirus wave along with seasonal flu could wreak havoc on the health care system– and the stock market.

Singaporeans queue up in a supermarket on April 3, 2020, as the government imposed tighter restrictions in the fight against the coronavirus – but a second wave came anyway. | Source :ROSLAN RAHMAN / AFP

Singapore is already experiencing a second wave of coronavirus  this month centered on migrant worker communities. Meanwhile, nearly half of Americans — 48% — say they won’t visit public places until they’re sure the coronavirus outbreak is over . Stock market valuations reflect the hope that the pandemic will be over soon. That’s far from certain.

The Extraordinary Stock Market Risk On Rally

The stock market’s spirited rise from the S&P 500’s Mar 23 low of 2,191.86  is predicted on extreme optimism about the coronavirus. Not to mention the lingering fallout from the pandemic’s devastation to the economy.

Bullish Wall Street investors are setting rosy benchmark targets based on the hope that the worst of the coronavirus is behind us. BlackRock CEO Larry Fink says we’ve seen the equities bottom, “if the disease curve in the developed world continues to decline.”

Meanwhile, the market is hanging its hat on the hope of a sudden, breakthrough COVID-19 cure. The Dow Jones rose and fell this month on a Gilead coronavirus drug trial. Mad Money’s Jim Cramer actually said on Thursday:

No, the jobless claims are horrible like Carl said. But we don’t talk about the scientists who were hard at work who may have breakthroughs.

They “may have,” but that outcome is far from certain. So is getting through the next fall and winter without a coronavirus resurgence in the Northern hemisphere.

So this equities rally is unequivocally speculative. Markets are going risk-on amid the most severe economic standstill in history. And the dire economic conditions are the result of a novel virus no one saw coming, and the drastic efforts to contain it.

That’s mad money indeed.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered investment advice from CCN.com. The author holds no investment position in the S&P 500 at the time of writing.