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The anticipation is palpable... and building fast. We've had three reports on extremely effective upcoming coronavirus vaccines, and each report practically blows the last one out of the water.
First we heard preliminary reports that Pfizer Inc. (NYSE: PFE) and BioNTech SE's (NASDAQ: BNTX) revolutionary messenger RNA (mRNA) coronavirus vaccine was 90% effective. That was great... until yesterday morning when the biotechs got back in touch to say the real figure was something closer to 95%. And in the middle, we've heard from Moderna Inc. (NASDAQ: MRNA), which is reporting its mRNA vaccine is 94.5% effective.
Every time, stocks have taken off like a shot at the news; vaccines have helped push the Dow back above its February 2020 highs.
Here's the thing... setting aside the six vaccines The New York Times reports are in limited use in China and Russia - about which there are many unanswered questions - there are at least nine more coronavirus vaccines deep in phase 3, large-scale efficacy trials.
And there are no less than 55 more candidates in earlier, phase 1 and 2 trials. Some of these vaccine candidates won't advance, but others almost certainly will - two have already.
That all this has happened in less than a year is an "Apollo moonshot"-like scientific achievement. But that's also a whole lot of concentrated upside potential that could flood the markets and push stocks to almost unthinkable highs.
So I asked Money Morning Chief Investment Strategist Shah Gilani what it all means for us investors...
The "Post-COVID" Outlook Looks Bullish
Greg Madison: Hey, Shah! Thanks for talking with us again.
Shah Gilani: Absolutely! It's been a wild few days. I had a feeling I'd hear from you.
GM: I bet! So, we've had these positive preliminary reports which, naturally, have triggered some bullish, optimistic buying out there. We've been told - I mean, I think it's self-evident - that an effective, widely used vaccine is going to be essential to "getting back to normal," and the market and the economy are all tied up in that. Do you think investor optimism is justified here?
SG: It certainly is justified, and I think it's understandable, too. Who doesn't want their life back? I mean, we basically can't get back to normal - can't open schools, can't get the economy firing on all cylinders, can't restart the services sector, can't return to growth... None of that can really happen without at least one effective vaccine. You know it, I know it, and, certainly, investors know it.
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We've got Pfizer's and BioNTech's updated data, which was an improvement over the preliminaries, and we've got Moderna's preliminary data. Pfizer and BioNTech could take their findings to the FDA for emergency authorization literally any day now. The FDA, by the way, said it would accept a vaccine efficacy rate of 50% or better - so these are definitely in the "or better" column.
Both these candidate mRNA vaccines look to be in the neighborhood of 95% efficacy. One dose of measles, mumps, and rubella (MMR) vaccine is 93% effective, and that's known as one of the most effective in the world. The annual flu jab is anywhere from 10% to 60% effective, but the flu mutates and changes year to year, and health officials have to try and anticipate whatever strain will predominate in any year.
The logistical hurdles, too, might not be as high as we first thought - the "cold" reality of distribution doesn't have to be so chilling! Pfizer, BioNTech, Moderna, and so on are saying some of these candidates can be kept on dry ice for several days, as opposed to the -100 degrees they thought they might need. Plus, you've got Operation Warp Speed - the Army, scientists, the big package carriers, local health departments - it's a huge combined effort. Companies like FedEx are going to play a role in distribution, and they're trying to get out ahead by building out their own new cold storage facilities.
Investors can see all this, and in these facts they're definitely seeing the end of this pandemic at some point in 2021; "normalcy" will be hot on its heels. They're jockeying for position now; anyone out of position by the time this pandemic ends will be too late. Once we get a vaccine, equities will have much, much higher to go.
GM: So should we expect more of this, these sharp, punchy rallies as we get more and more data from these and other vaccine researchers? I think Johnson and Johnson (NYSE: JNJ) and the AstraZeneca Plc. (NASDAQ: AZ) - Oxford University and the NovaVax Inc. (NASDAQ: NVAX) efficacy trials are deep into phase 3 right now. And of course, just about any day now, we'll get some kind of ruling from the FDA on the Pfizer-BioNTech candidate; Moderna can't be too far behind. Hopefully the good news is that they've got their EUAs in hand.
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SG: Yes, it's a virtual certainty that we'll see stocks jump if we get any news. In the market, sometimes good news is bad news, and bad news is good news - particularly where the U.S. Federal Reserve is concerned - but it's a fairly straightforward "Yes, good news is really good news" scenario with these vaccines. I'd expect the market to be particularly bullish if any new mRNA vaccines appear; that means there will be more to go around, sooner.
GM: So... should we all 86 our earnings calendars? Are efficacy reports the new earnings reports?
SG: No! Don't do that; keep 'em handy. I'd say they're not the new earnings reports... but they're certainly earnings "cheerleaders." Good earnings started driving the markets higher; these trial results are now kind of like analysts marking up expectations for future top- and bottom-line growth.
And don't forget, there's still some kind of stimulus coming. Pandemic recovery could very well define Biden's presidency, and he will have to spend, spend, spend, and spend some more to get it done. The Fed is still going to be accommodative - until its hand is forced, anyway. That's a problem down the road, maybe in the first, but more likely in the second quarter, if we get solid growth and interest rates rise along with inflation... That's not on many analysts' or economists' radar screens, but it's certainly on mine.
The vaccine is basically the North Star, but other stimulative impacts are coming to "light up the sky."
GM: Speaking of recovery, let's get into that a bit. Back in 2008, as we all remember, the financial system itself was severely damaged, like an engine with no oil in it. We had the infamous "Slowcovery," to the point where even by 2014, 2015, the White House was forced to say, "Well, it could have been worse."
Do you think this recovery will be quicker in coming? The financial system seems healthier.
SG: It is healthier, but remember: There's billions more in leverage on balance sheets - a lot more debt. And there are more "zombie companies" than ever.
GM: What do you think are the prospects, particularly six, eight, 10 months from now as we vaccinate healthcare workers, at-risk groups, frontline workers, and so on? Even school-age children - and I'm not just saying that because I have young kids! When you think about it, the economy can't go all-out if we have huge groups of workers who have to divide their time.
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SG: I see what you mean. I think, generally, the prospects are phenomenal once we get a "critical mass" of vaccination. People, not just in America but all over the world where they've been clobbered by the pandemic, really want to get their lives back; there's an immense, immeasurable amount of pent-up demand out there for all kinds of goods and services.
People - too many people - had been fearful of the election and earnings to jump into the market. They see a conclusion there; they see a vaccine coming. They're starting to jump in now, and quite rightly, too. These folks have one or two trillion dollars to bring into stocks over the next year or two. That's a ton of dry powder.
GM: What's your best advice for someone who's been nervous to get into the market?
SG: The recovery could be extremely rapid. Investors, especially new ones, are going to have to step in quickly - as in, right now. We'll probably get a few more pullbacks before we all get our COVID-19 jab, but those pullbacks are going to be much easier to live with - going to be opportunities, even - in light of what's coming. Not getting in now is a huge chance wasted. I'd counsel everyone to be patient and selective. Buy good companies with manageable debt levels - beware of zombies.
GM: I've got to ask: As a bullish guy, where do you see the Dow on the far side of this, say 2023?
SG: Oh, I'm already on the record! I told Stuart Varney on "Varney & Co." that we could make 33,000 or even 35,000 if we get no vaccine hiccups and we crush COVID-19. Stuart actually reminded me last week that back in May, I was the only one who was predicting new highs by year end... and here we are. I think it's an easy trip to 33,000 from here, and 35,000 is definitely possible.
GM: Thanks once again, Shah!
SG: See you next time.
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