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This has been a great month for the news and Wall Street and it has been taking in every drop. On Election Night, we learned that five states had legalized marijuana in some way and, less than a week later, we discovered that Democratic Party challenger Joe Biden would become the next president of the United States, like Wall Street. he had been modeling for months.
But it was the astonishing announcements of the 2019 coronavirus disease (COVID-19) vaccine from Pfizer (NYSE: PFE) Y Modern (NASDAQ: mRNA) Over the past two weeks they have really shaken the tree and caused the overall market to skyrocket.
Image source: Getty Images.
It started with Pfizer and its development partner BioNTech (NASDAQ: BNTX), which reported wildly successful interim test results for its COVID-19 BNT162b2 vaccine on November 9. The study, which has enrolled more than 43,000 participants, produced a vaccine efficacy (VE) of greater than 90%. Since most researchers expect EVs close to 50% to 60%, which is typically what we see in flu vaccines, this exceeded expectations.
This was followed a week later by Moderna announcing that her interim analysis for mRNA-1273 in the COVE study yielded an EV of 94.5%. Moderna’s study involves more than 30,000 American participants and is working with McKesson as your vaccine distributor.
These analyzes suggest that there may well be a light at the end of the tunnel for the COVID-19 pandemic, and it rightly has Wall Street excited. In the first 10 trading sessions of November, the S&P 500 has gained 10.9%, marking its best start in a month since 1987.
But what if I told you that these vaccine ads may well indicate a peak in the stock market? While it’s probably hard to believe, with the perspective of “normal” back in perspective, there are four very valid reasons to be skeptical about short-term COVID-19 vaccine stocks and stocks.
Image source: Getty Images.
We do not yet know the finer details of these studies.
For starters, I strongly advise investors not to overlook that both interim analyzes lack critical data. While the VE from both studies is very encouraging and much better than almost anyone could have predicted, it does not tell us the duration of VE or how well these vaccines performed in higher-risk groups, such as the elderly and the elderly. people. with chronic diseases. The duration of protection is especially important and could have serious consequences for the success of a vaccine and its convenience to the public.
There will be timing / distribution challenges
This is probably obvious, but in case you’ve forgotten, this pandemic is not a light switch these vaccines are going to turn off. Even taking the leap and hypothetically assuming that the Pfizer / BioNTech and Moderna vaccines are approved, it is unlikely that we will see nationwide availability of these treatments until mid-2021. This means it could be almost a year before we see uptake. generalized of either vaccine.
There may also be distribution problems. The Pfizer / BioNTech vaccine must be stored at minus 112 degrees Fahrenheit (F), which could be especially tricky. The Moderna vaccine is not as worrisome, and the treatment is expected to remain stable for 30 days between 36F and 46F. It can also be shipped and stored for up to six months at -4F.
Image source: Getty Images.
The good news is already built into the ratings
Another issue to consider is that it is going to be very difficult to beat the initial EVs that Pfizer / BioNTech and Moderna have put on the table during their initial reviews. With the exception of an EV truly above the 90th percentile and a considerably more storage-stable candidate vaccine, we’ve probably already seen the peak euphoria built into these COVID-19 vaccine stocks.
For example, Moderna ended on November 16 with a market value of nearly $ 39 billion. That’s about eight times higher than its maximum annual sales projections for mRNA-1273, and something on the order of 10 times higher than where annual mRNA-1273 sales are expected to settle after an initial spike. With more than two dozen drug developers also developing a vaccine, Moderna looks exceptionally expensive. One mistake, or an interim analysis leading the market, and this inflated valuation could quickly deflate.
Industry turnover could be bad news for investors
But most terrifying of all could be the industry rotation we see in this vaccine news, away from work-from-home businesses and toward value stocks.
If you ask me, I think it’s about time value stocks got some love from Wall Street. They have been in the dust since the Great Recession, with historically low interest rates encouraging high-growth companies to borrow and expand. But it is these high-growth cloud, cybersecurity and telehealth industries (to name a few) that have been responsible for driving the overall market higher in 2020. If we see a continued investment rotation from these high-growth stocks to a Si As value grows, it would be a telltale sign that the stock market has peaked. If anything, backing up bleeding valuations becomes much more difficult when slower-growing value stocks are leading the charge.
For what it’s worth, I’m not suggesting that investors alter the way they are putting their money to work in the months and quarters to come. However, keep in mind the real possibility that a lot of good news this month could cap off the broader indices.
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