It’s the news that everyone was waiting for. Moderna (NASDAQ:MRNA), a biotechnology firm that surged in prominence because of its credible race toward developing a novel coronavirus vaccine, released the results of its encouraging Phase 1 clinical trial. Due to the trial’s positive implications, the major indices jumped higher. Naturally, blue chips like Visa (NYSE:V) went along for the ride, with V stock closing up more than 4% on the announcement.
On the surface, this is exactly what the bulls needed to justify their belief in a quick, V-shaped economic recovery. With Moderna’s gift to America and the world, this thesis – which was looking like a long shot last week – just received a massive credibility boost.
As you know, the current malaise is unlike any other downturn in that it was virtually exclusively driven by a health crisis. In February of this year, President Trump famously – or infamously, depending on your political views – touted the strength of the economy, specifically emphasizing low unemployment and rising wages.
Unfortunately, the coronavirus changed everything, sending even reliable names like V stock into the gutter a month later. But should the scientific community find a treatment or vaccine, the bullish narrative could theoretically return.
And Moderna’s results validate that optimism. The biotech vaccinated dozens of study participants and measured antibodies in eight of them, according to a CNN Health report. Specifically, these eight participants developed neutralizing antibodies of a magnitude reaching or exceeding levels witnessed among patients who recovered naturally from Covid-19.
Essentially, this immune response blocks the coronavirus’ harmful effects. Obviously, this would be a huge positive for V stock due to the lift in consumer confidence.
V Stock Still Has Credibility Issues
But in life, few things are so simple. Sadly, I fear this is the case with Moderna’s vaccine.
Don’t read me wrong: I’m not trying to add any more negativity to this situation. What I’d like to do, though, is to keep expectations in check.
For one thing, Moderna’s Phase 1 trial involved a very small sample. Yes, the granular science and its implications were very encouraging. At the same time, the scientific community has a responsibility to ensure the efficacy of this vaccine and that the results didn’t come from a fluke occurrence.
Second, time is of the essence, which means many procedures are necessarily rushed. For instance, the Food and Drug Administration cleared Moderna for Phase 2 trials. Additionally, the company plans on starting large-scale Phase 3 trials in July. However, these trials may not have the numbers that you would typically see in any other circumstance.
Finally, the encouraging Phase 1 test results were not peer-reviewed. Again, this is understandable because of the urgency. But a lack of peer review can create exaggerated findings, such as what happened with hydroxychloroquine-based Covid-19 treatments.
Should peer review or further clinical trials reveal less-than-stellar data, V stock can just as easily give up its gains.
Even if everything turns out well with the vaccine, that only eliminates the health portion of this crisis. While a pandemic caused the economy to shut down, we now have 20.5 million jobs lost, with more losses on the horizon. Plus, over a two-month period, more than 36 million Americans filed for unemployment benefits.
Call me a pessimist but I don’t think you can just wish these jobs back. And without people engaging in normal consumptive behaviors, the environment for V stock would still be bearish.
Ideological Fracturing Is Also a Problem
Unless you’re deliberately choosing to be intellectually dishonest, you know that our nation was deeply divided prior to the pandemic. Today, the new normal has only exacerbated these tensions. But how does this impact V stock?
As I mentioned at the top, Visa shares jumped on Moderna’s vaccine news. But vaccines are not 100% failproof, according to the Davidson Institute of Science Education. In fact, they argue that to increase a vaccine’s efficacy, a greater percentage of the populace must be vaccinated. To refuse is to reduce overall effectiveness.
Well, that would be a problem.
Based on a report from Politico.com, the anti-vaccine movement – which at its inception was a vocal fringe group – has steadily crept into the mainstream conservative machinery. So, even if Moderna developed a genuinely effective vaccine, there’s no guarantee that everyone will take it. Indeed, quite a few will likely refuse and vocally, encouraging others to be skeptical.
Of course, I don’t know how this is going to play out. But the biggest point is that there are multiple variables here. Therefore, the smarter approach is to be cautious with V stock. Yes, the vaccine data is encouraging but we’ve got a long way to go yet.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
