Biotech firm Moderna reported Tuesday that the results of its early-stage trial for an experimental COVID-19 vaccine were positive. Of the 45 patients that received the vaccine, all showed an “immune response.” This means the body’s immune system prepared itself to attack an introduction of the virus into the body. Is this the beginning of the end of the COVID-19 pandemic? What will this mean for markets going forward?
As of the publication of this article, pre-market futures pointed to a major rally across U.S. financial markets. This implies that investors believe that Moderna’s vaccine is promising. With the development of a robust vaccine, people will no longer fear getting infected, and this means all of the precautions taken to avoid its spread will come to an end. This is the practically inevitable end to this pandemic. One day the vaccine will be developed, and within weeks it will be available globally and everything will go back to a relative “normal” state. When will this be? If Moderna’s data is correct, it could be within months.
What will this news mean for broader markets? Industries that have suffered deeply because of the virus, including tourism and anything to do with travel, will bounce back albeit in a measured fashion. Airlines, rental car companies, restaurants and hotels will all rally. Safe havens like gold and treasuries will sell off. In the meantime, this new recovery may allow the Fed to begin thinking about offloading its already incredibly bloated balance sheet.
What will this mean for the election? President Donald Trump and Joe Biden have unique ways to play this news and turn it into a win for their respective campaigns. Trump needs to spin this and say “the pandemic is over, consumer confidence needs to recover quickly, and in order to push the country out of this malaise, I will be issuing two more stimulus checks of $2,500 per person in August and October.” He then needs to make sure the Treasury can pull this off logistically learning from the mistakes of the first round of checks. If these stimulus checks arrive and people begin spending in late August, this will mean recovery for the economy. Unemployment will drop and consumers will spend again.
The second check in October? That will be the icing on the cake, and voters will go to the polling places with cash in their pockets, optimistic about their future. No need for change. Trump wins. The end.
And Biden? Biden can only win in one way. The pandemic needs to get worse, and Trump needs to drag his feet. But this is not enough. Biden needs to continue to do his centrist spiel hoping he can chip off enough Trump votes to win, but he cannot, because he has already lost the progressives. He needs to make a hard left, promote health care for all, minimum basic income and enough progressive ideals that even Republicans will have no choice but to buy into his vision for America. Short of these steps, Trump wins for sure.
