Investors are betting on medicine and pharmaceuticals to restart the US economy
Investors are pinning their hopes on a rebound in the US economy, on the potentially wider availability of tests for COVID-19, and on trials of drugs to treat this deadly disease. That said, until concrete progress is made in these areas, further benefits to the stock market may be limited..
Most of the S index&The P 500 is up nearly 27% above its lowest since March 23rd. This growth is driven by hopes that massive US financial and monetary support will dampen the economic blow from the coronavirus pandemic..
The index has recently responded to reports of research and, in particular, experimental treatments for COVID-19. “Remidesivir”, developed by Gilead Science. “Remdesivir”, previously ineffective in the treatment of Ebola, designed to prevent the virus from multiplying and suppress the patient's immune system.
This volatility underscores heightened investor interest in signs of when state and federal governments can begin to cut retirement and return people to jobs..
There are still no approved treatments or vaccinations for the disease, which has killed more than 190,000 people worldwide. According to the latest data from the US Centers for Disease Control and Prevention, the disease has infected more than 928,000 people and killed more than 52,000 people in the United States alone..
«Any sentiment surrounding the success of therapy really drives the markets because it creates the expectations of a return to normal that are necessary for economic recovery to begin.», – noted Sean Cruise, Trading Strategy Manager at TD Ameritrade in Jersey City, NJ.
Index S&P added in value on Friday after lead researcher on “Remdesiviru” the US government told Reuters that the test results could give results as early as mid-May.
But on Thursday, the index temporarily declined after the release of a report that the drug Gilead Science did not pass the test, the drug manufacturer itself considered the findings inconclusive, because the study was completed ahead of time. On April 17, investors were encouraged as medical news outlet STAT reported rapid improvement in COVID-19 patients at one hospital testing the drug..
Michael O&# 39; Rourke, chief market strategist at JonesTrading in Stamford, Connecticut, encouraged by the number of researchers tackling coronavirus treatments, but wary of the near-term stock market outlook.
«The only thing that consistently propels us above this range is a therapeutic solution or a vaccine that will allow us to return to pre-crisis business levels, ”he said. – I think we'll get a medical solution. The big question is timing. The longer it takes, the harder (for the economy) it will be to bounce back».
While more than 70 coronavirus vaccines are in development, Stephen Slaughter of Manulife Investment Management, which runs a dedicated health fund of about $ 3.5 billion, said he expects a successful vaccine to take at least 12-18 months to develop, compared to the average vaccine development time 5-7 years.
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Then it could be years before pharmaceutical companies can produce enough to vaccinate the entire population of the world..
But Slaughter is optimistic that at least the next three to six months some kind of treatment will be confirmed by trials, and said it would give officials «more opportunities to restart the economy».
He said there are four main types of treatments that are being tested by a number of companies, including Gilead, Takeda Pharmaceutical, Regeneron Pharmaceuticals, and Alexion Pharmaceuticals..
While treatment may not necessarily slow the spread of the disease, it can help doctors control the progress of the disease by relieving the burden on intensive care units (ICUs).
«If we can take a patient who would otherwise have spent 2-3 weeks in an ICU and will be released from that ICU in 2-3 days, this will have a huge positive impact on our ability to cope with outbreaks or deal with a potential second. wave of epidemic», – he said.
According to experts, there is a need to find more affordable tests to help detect viral infections, as well as to develop ways to track people who may have been infected before quarantine measures are relaxed..
«What will be more important is the testing capabilities and effectiveness of tracking programs», – considers Salman Ahmed, Chief Investment Strategist at Lombard Odier Investment Management. Tests are being developed by Abbott Laboratories and Roche Holding.
As most of the US population has been forced to stay at home and many businesses have been suspended since mid-March, investors have already accounted for the drop in earnings and the significant economic slowdown in the US in the second quarter..
However, the recent successes of S&P appears to indicate hope for economic improvement in the third quarter, believes Peter Tewes, President of Chase Investment Counsel in Charlottesville, Virginia.
«There will be a vaccine and treatment for COVID-19, but people underestimate the amount of time it takes them to get to market, Tewes said. – If there are frustrations in three areas – vaccine, treatment and testing – we can track it in the market».