Investors Should Not Follow Coronavirus “Immunization Booklet”: Strategist

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Investing in a “vaccine record book” is a dangerous approach to take, warned a strategist after news from the pharmaceutical industry added to market volatility earlier this week.

Speaking to CNBC’s “Squawk Box Europe” on Wednesday, Fahad Kamal, chief market strategist at Kleinwort Hambros, said recent market developments have demonstrated “how dangerous it is to follow any type of immunization manual.” “

Biotech company Moderna upped markets on Monday after reporting positive data on an early stage trial for its Covid-19 vaccine. However, markets retreated later in the week after vaccine experts expressed skepticism about the data from Moderna, and the economic damage from the crisis returned.

The president of the company told CNBC he would never release data on his potential vaccine that would be different from “reality”.

Kamal noted that most scientific experts believe that it will take at least 12 to 18 months for a safe to use vaccine to reach the market.

“The few who seem more optimistic than that seem to have political agendas,” he told CNBC. “So I would like to be wrong on the side of science and say that we are still far from that. “

President Trump has expressed his ambitions for a vaccine to be developed and distributed by the end of this year, in a project called “Operation Warp Speed”.

However, medical experts – including Dr. Anthony Fauci, the United States’ leading expert on infectious diseases – have questioned Trump’s purpose, expressing skepticism over time.

Kamal also stressed that a vaccine would not be a silver bullet for all the problems created by the coronavirus epidemic.

“Even if a vaccine were to be developed by the end of this year, we are already seeing such dramatic scars in the economy that it will not be as simple as flipping a switch and returning to where we were at the start. this year, “he told CNBC. “There is going to be residual damage that will take much longer to operate. “

World Bank President David Malpass said Tuesday the organization expects the global economy to contract by 5% this year, resulting in the loss of millions of jobs and increased poverty in the world.

Dead cat bounce

Wall Street had its worst first quarter on record as the new coronavirus became a global pandemic, but stocks rallied in April and were volatile in May in light of news about the virus and potential vaccines and treatments. The European and Asian markets followed a similar pattern.

While stocks have generally shown signs of recovery since their dramatic fall in March, Kamal warned investors on Wednesday not to be too optimistic about the rebound.

“This is the classic rebound of a dead cat,” he told CNBC. “Of course we don’t have a crystal ball, but if you look at the speed of this rally, if you look at the ratings from the trough of March 23 until we are right now, and considering the general state of the wider economy and (the fact that) profits continue to decline, it would have been extremely unusual for us to have bottomed out on March 23. “

Government-imposed foreclosure measures, coupled with supply and demand shocks from the coronavirus crisis, touched corporate profits in the first quarter, and a number of analysts warned that companies could take longer than the markets expect to recover.

Describing the corporate landscape as “Darwinian”, Kamal advised investors to consider companies on a case-by-case basis, taking into account their balance sheet, market position and resilience. He also cautioned against taring companies with a broad industry-based brush, noting that some tech companies – like Uber or WeWork – are not doing well, although tech stocks are often seen as a safe bet.

“On the other hand, there will be airlines and others, those who have money, those who can manage to survive now, who will seek to consolidate their market positions, to gain market share and really get out of it. much stronger crisis, “he said. “If you think of the well-capitalized Qatar Airways players around the world, they could probably be stronger in a few years. “

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