The speed at which many markets recovered from the Covid-19-crash in March was almost as unprecedented as the speed at which they had crashed in the first place. From the fastest bear market in history to one of the most compressed bull markets, too. The story of this recovery is well told – facing a new world of remote working and heightened health concerns, technology and pharmaceutical companies led the charge. The former would deliver the tools we need to adapt our ways of living and working, the latter the drugs we need to protect ourselves from the new physical threat we now appear to face.
Unlike the soaring US market, London’s indices have long been poorly represented in both sectors, hence the FTSE’s lagging recovery. But it did not miss the excitement entirely, as AstraZeneca rode the trend to become the biggest company on the London market, helped along by hopes that it would quickly deliver a coronavirus vaccine at an unprecedented speed and help us all return to normality.
That progress has been stopped in its tracks by news of an illness in one of its test subjects, which has seen its vaccine trial temporarily halted. We know little more than that, although industry observers have been quick to point out that the illness may be unrelated to the vaccine and that, when safety is paramount, the suspension of a trial is not unusual – and Astra’s shares have indeed recovered some of their opening losses.
But there is still more than a whiff of wishful thinking about the idea that Astra – or rivals Moderna and Pfizer, which also have vaccines in large trials – will really deliver a solution to Covid-19. The fastest vaccine previously produced was for mumps, which took four years. The only disease ever eradicated through vaccination has been smallpox – and that took two centuries. There is conflicting evidence about how Covid-19 mutates and whether one vaccine will suffice – if it’s anything like flu then the answer is no. And if it ends up like the common cold – which is sometimes caused by one of the milder strains of human coronavirus – then why bother? Nor do investors appear to be discriminating between vaccine and treatment – surely only one can ultimately win out. Similarly, if we do believe in a vaccine that will end this Covid limbo then why are we also chasing technology stocks, whose valuations appear to depend on the virus keeping us semi-imprisoned in our homes for the foreseeable future?
There will be winners, of course, and the likelihood is that Covid-19 will not be ‘solved’ with a widely available vaccine any time soon, which means technology remains a safer investment as it helps us live with it. Chasing healthcare stocks to hit coronavirus riches, on the other hand, seems less a case of wishful thinking than muddled thinking, or – as seems increasingly common in today’s markets – no thinking at all.