By Jake Willms, Quantitative Analyst
By the time markets close on Friday, the S&P 500 will have nearly recovered all of its initial losses dating back to March when markets around the world experienced turmoil surrounding the spread of COVID-19. The NASDAQ, a market cap-weighted index with heavy composition of technology and health care firms, has been thriving recently, reaching new record-highs and surpassing it as soon as the next day.
At the same time, investors appear to be ignoring the alarming rise in confirmed cases of COVID-19 around the country. This past week, California reported a record spike in coronavirus cases, surpassing New York as the state with the largest number of cases. More than half the country has introduced some form of mask requirements in public areas, with Alabama, Arkansas, Texas, Ohio and Colorado all issuing statewide mask mandates in the last few days. Worse yet, Dr. Scott Gottlieb, former Food and Drug Administration Commissioner, told CNBC that COVID-19 deaths in the U.S. could reach 300,000 this year unless present trends change.
While Americans battle with the economic challenges from COVID-19, researchers are working around the clock for a vaccine. More than 150 possible vaccines are being developed and tested around the world to try to stop the pandemic. Currently, there are no less than 23 candidates in human clinical trial. The Oxford vaccine has rapidly leapfrogged other contenders and might finish its final-stage trials in September, before others even start testing at that level.
The U.S. government has invested a whopping $1 billion in a vaccine being developed by the University of Oxford (known as ChAdOx1 nCoV-19. Phase I and II trials have showed that the Oxford vaccine is safe and "produced strong immune results," according to the research published on Monday in The Lancet medical journal.
Further, on Wednesday it was announced that the U.S. will pay Pfizer and biotech firm BioNTech $1.95 billion to produce and deliver 100 million doses of their COVID-19 vaccine if it proves safe and effective. Johnson and Johnson and Moderna have also announced promising trial results for vaccines they have been developed, and for which they have received government support via “Operation Warp Speed”, the Trump administration’s program to hasten the development and production of COVID-19 vaccines and treatments
No one knows how this will all play out and whether the stock market’s apparent optimism that all will be well, is justified. However, the risks investors face are clear.
It is up to each investor, perhaps with the help of a financial advisor, to carefully consider how best to account for these unprecedented risks as they manage their investments.