With COVID-19 cases on the rise in the US and with no end in sight, an analyst believes that an excessively bullish market faces two major risks to its assumptions that the economy may recover from the pandemic.
On Monday, the University of Oxford and AstraZeneca announced promising results from an early-stage human trace of their vaccine candidate. In the face of rising hopes for a coronavirus vaccine, investors have been aggressively taking shares, despite bad news about new COVID-19 infections.
However, Tom Essaye, founder of the Sevens Report, told Yahoo Finance on Monday that markets are downplaying the key problems associated with vaccine development. Currently, the drug giants Pfizer (PFE), Johnson & Johnson (JNJ), AstraZeneca (AZN) and Moderna (MRNA) are among those competing to find an effective treatment, and are in various stages of human testing.
Saying that asset prices are vulnerable to “vaccine disappointment,” Essaye told “The First Trade” that investors should be “careful with corporate press releases, faced with actual test data and getting something approved, and I think in the coming months that will really work. ” reach a critical point. “
Treasury Secretary Steven Mnuchin rubs shoulders with Rep. Kevin Hern, R-Okla., After a hearing from the House Small Business Committee on oversight of the Small Business Administration’s pandemic programs and the Treasury Department on Capitol Hill in Washington on Friday, July 17, 2020. (Erin Scott / Pool via AP)
The shares of biopharmaceutical companies have been on fire since they began working on treatments and vaccines to stop the pandemic.
Moderna has seen its shares increase more than 300% so far this year. However, JPMorgan analysts recently downgraded the shares to “Neutral” based solely on their valuable assessment.
According to Essaye, the second source of disappointment will be if a second expected stimulus package from Congrerss exceeds expectations. I would suggest that “people are suddenly nervous because the economy is not going to recover in time,” Essaye said.
“Essentially, all he will have done is delay the pain from April, June, July to November, December and January of next year,” he added.
Markets last week saw a rotation of big-cap tech names in defensive sectors like utilities and consumer staples ahead of the fiscal stimulus negotiations in Washington starting this week.
“It is all a question of how much the government continues to spend on stimulus versus how fast the economy recovers,” Essaye said. “I think there is more uncertainty today than was said three weeks ago.”
