Daily Management Review

Covid-19 Vaccine Results Are The Latest Risk For Stock Markets


Covid-19 Vaccine Results Are The Latest Risk For Stock Markets
The resurgence in stocks in the United States this year has been driven by the optimism that vaccines against Covid-19 are on the way which will bring an end to the novel coronavirus pandemic.  
And in the coming weeks, with investors waiting to see the results of clinical data on whether the vaccines actually work or not, the confidence and optimism will be put to test,  
Hopes that vaccines will soon be able to protect against Covid-19 have underpinned about 40 per cent of the total gains made in the US market since May this year, according to a UBS analysis. So far the pandemic has killed more than 960,000 people globally while also bringing down the global economy.
Efforts by pharma companies all around the world are currently coming to a close with a number of them set to soon disclose their late-stage data on trials. It is expected that companies such as Pfizer Inc and Moderna Inc will be publishing their third phase trial data as soon as October or November. The markets could be shaken if the results of the trials turn out to be disappointing. The markets have recently been experiencing turbulence because of concerns over fiscal stimulus delays and uncertainty surrounding the US presidential elections to be held on November 3. 
“The anticipation is that this stuff is going to work,” said Walter Todd, chief investment officer at Greenwood Capital in South Carolina. “So any news to the contrary could be a risk to the market.”
However analysts also say that since there are a number of vaccine candidates under development, therefore the failure of one could cushion its negative impact on the market. According to the World Health Organization, out of over 30 vaccines candidates that are currently being tested in humans globally, more than a half-dozen of them are in their late-stage trials.
“We are setting ourselves up for success in the sense of if you throw enough spaghetti at the wall, hopefully at least one noodle sticks,” said Liz Young, director of market strategy at BNY Mellon Investment Management.
That could be the reason that the stock market was barely affected earlier this month after news of halting of last stage human trials of the vaccine candidate of AstraZeneca Plc and partner Oxford University, one of the forerunners in the race to a vaccine for Covid-19. Trials were stopped after a volunteer in the United Kingdom fell seriously ill after being injected with the trial vaccine. Since then, trials have restarted in Britain, Brazil, India and South Africa but still remain halted in the US.
Initial efficacy results on their vaccine candidate could be reported by Pfizer and Moderna in October or November based on an early read of data. It is expected that would be followed by similar data from companies such as AstraZeneca, Johnson & Johnson and Novavax Inc.
There can be a surge in the travel, leisure and other stocks, which have been decimated because of the travel restrictions due to the pandemic, by an approval or emergency use authorisation this year.