NEW YORK (Reuters) – Optimism that vaccines will help end the coronavirus pandemic has been a major catalyst for the recovery in U.S. stock markets this year. The moment of truth will come in a few weeks when clinical evidence is released on whether these vaccines are actually effective.
According to UBS analysis, about 40% of the stock market gain since May can be attributed to hopes for vaccines against the coronavirus, which has killed more than 960,000 people worldwide.
Global vaccine development efforts are nearing a climax, with Phase III vaccine trials by Pfizer (NYSE: PFE) Inc and Moderna Inc likely to be available in October or November. If the results are disappointing, it could further unbalance the markets, which have recently become volatile due to fears of delayed fiscal stimulus and uncertainty around the US presidential election in November.
However, the abundance of vaccines in development can mitigate negative market impacts in the event of a failure. According to the World Health Organization, more than 30 vaccines are currently being tested in humans, of which several are already at advanced stages of testing.
This explains why stocks showed little response earlier this month to the suspension of global trials of the vaccine AstraZeneca (LON: AZN) Plc and Oxford University after one of the British volunteers became seriously ill. Tests have resumed in the UK, Brazil and South Africa, but have been suspended in the United States.
Pfizer and Moderna may report initial test results in October or November based on preliminary data, followed by reports from AstraZeneca, Johnson & Johnson and Novavax Inc.
Even if the vaccine is approved, questions remain about how easily and quickly it can be distributed. US President Donald Trump and health officials have conflicting predictions about when the general public will be able to access vaccinations.
“The source of potential market disappointment is likely to be the realization that production and wide distribution will take longer,” said Art Hogan, chief market strategist at National Securities.
An approved COVID-19 vaccine that has been shipped to most parts of the world and accepted for use could add 300 points to the S&P 500, or 8% of the current level, said Keith Parker, head of US and global strategy at UBS.
If the vaccine becomes widespread in the first quarter, BofA Global Research projects global gross domestic product to grow by 6.3% in 2021, up from 5.6% if it doesn’t happen until the third quarter of next year.
(Lewis Krauskopf; translated by Anna Rzhevkina. Editor Anna Kozlova)