My family has been enjoying John Krasinski’s “Some Good News” (available on YouTube) during the shutdown. Krasinski’s regular installments of good news has been a fun and touching reminder that there are still positive things happening in the world despite the virus news and barrage of negativity. Certainly not all is gloom and doom in the stock market as markets continue to find reasons for optimism, rising this week by more than 3% to hit a new ‘post-virus’ high. This week I will follow Krasinski’s example and outline some of the good news that the market is seeing and explain why the market has rallied despite continued high unemployment and bad economic data.
States are beginning to open
According to the USA Today, all but two states are easing lockdown restrictions, opening-up for business. Ventura County California, where my home is located, has just received a waiver to begin the next phase of opening. Already freeways seem more crowded, stores are beginning to open, and restaurants proudly advertise ‘Open for Take-Out’. I suspect you feel it too. Signs of life are beginning to sprout in the US economy. A recovery in beginning and consumers are starting to spend.
One positive indicator was Home Depot’s Q1 results which included an 80% increase in online sales year over year and a 7% increase in total sales compared to the prior year. Another indicator, jobs, is currently dismal with more than 23 million Americans unemployed. However, more than 87% expect their unemployment to be temporary. Similarly, the consumer confidence survey indicated that 41% of respondents expect there to be more jobs 6 months from now. We hope they are right!
Remdesivir in the short-term
The stock market also noticed the FDA has given emergency use authorization approval of Gilead Sciences drug Remdesivir for treatment of Covid-19 patients. While Remdesivir is not a cure for Covid-19, the drug has shown effectiveness in reducing the severity and duration of a Covid-19 infection, similar to the impact that Tamiflu has on flu symptoms. As a matter of fact, Tamiflu is also developed by Gilead Sciences. The use of the drug promises to significantly reduce the number of fatalities from Covid-19 and reduce consumer’s fear to go about their daily lives.
A Vaccine in the long-term
The stock market is taking notice of Moderna’s successful phase I trial of their Covid-19 vaccine. The initial trial, which consisted of 45 individuals, resulted in Covid-19 antibody levels that were higher than or equal to the levels of recovered Covid-19 patients. The Moderna vaccine is remarkable in that it is genetically engineered, and therefore, much easier to produce than traditional vaccines. The vaccine still must go through phase II and phase III trials, which experts still expect to take 12 to 18 months to complete despite the rush on development.
While there is still plenty of bad news in the economic data, there are also good reasons to believe that the economy will emerge from the current crisis.