The equity markets around the world roared on Monday. US equity futures pointed to a strong opening after Moderna, one of the companies engaged in the race for a vaccine to the coronavirus, announced promising results on its phase one trial.
In the words of Moderna’s CEO, the results “could not have been better.” Stocks did not need much and roared at the opening, with Dow closing the day over 900 points higher – Moderna alone being up +290% in the last two months.
Defying Economic Recession
Global equity markets have defied economic recession worries as investors focus on the medium to longer term instead of the present times. Make no mistake, the economic damage from the pandemic is the worst since World War II.
According to a study by McKinsey, the earliest job losses in the US have hit women harder than men, with women making up 59% of the initial jobs lost. Industries like leisure and hospitality, retail trade or education, and health services were hit the hardest, while information, wholesale trade, and transportation and warehousing suffering less.
Asked about how long it would take for a company to get back to business as usual, the majority of the respondents of a study by PricewaterhouseCoopers settled for a period between 1-6 months.
Once again, the study reflects human optimism when facing such difficult economic conditions. Unlike companies that need more time to get back on their feet, financial markets reflect such optimism instantly.
As such, on news that a vaccine may be in the cards later in the year or maybe even next year, investors poured into risk assets, forgetting everything about the rationale behind the economic recession. What is interesting is that not all investors are institutional ones – retail accounts jumped as well.
Robinhood, the US-based platform that allows investors to buy fractional shares in the US stock market, announced that the daily trade volumes were up 300% in Q1 2020 compared to Q4 2019. Moreover, customers moving cash into the platform to buy securities (i.e., net deposits) saw an increase of up to 1600% compared to Q4 2019. Considering the bounce in the stock market, Q2 2020 is on track for more records.
If anything, the stock market reflects the optimism that, in the end, humankind will get its head around the pandemic and move on – sooner, rather than later. FOMO (Fear of Missing Out) makes stocks look like Veblen goods.