5/25/2020: Weekly Wrap-up & What to Expect

Moderna announced positive P1 data for its COVID vaccine, driving markets upwards.

Stock prices were propelled upward last week due to two key announcements. Last Sunday, Jerome Powell said the central bank still has plenty of ammunition to help the markets and economy. Then, Moderna (NASDAQ: MRNA) announced positive data on their COVID vaccine on Monday morning. This combination of news drove the S&P 500 increase by 3.2% over the course of the week. With all this good news, can we expect more? Here are the details:

  1. On Sunday, Fed Chairman Jerome Powell announced that the Fed is not out of ammunition 'by a long shot', driving premarket trading. Last Sunday, on "60 Minutes," Jerome Powell told the interviewer that "we're not out of ammunition by a long shot," referring to a large sum of unused funds that have been allotted to fight COVID. Simply put, Powell plans on continuously infusing money into the economy to attempt to save small business from closing and permanently reducing the number of jobs available. Index futures traded significantly higher the same night.  

  2. The next morning, Moderna released positive interim P1 data for their COVID vaccine, pushing stocks further upwards. The morning after, Moderna announced positive data on their COVID vaccine. The biotech company demonstrated generation of anti-COVID antibodies in patients without significant side effects. The company plans on starting their pivotal P3 clinical trial in July, which, if successful, will lead to a much faster economic recovery with everyone's concerns of infection put at ease.

  3. On Thursday, over 2M Americans filed unemployment claims, but investors remain optimistic over economic reopening. As usual, the announcement of an additional 2.4M Americans filing for unemployment claims did not shake the market. Through our small sample size of consumer research, we have found that many are not working because of high unemployment benefits during COVID. Restaurants are worried about reopening because there may not be enough supply of workers to hire from in order to reopen their shops successfully. While more continue to file for unemployment claims, investors are confident that many will be able to sustain on government support and will reengage with the economy as it reopens. 

  4. To date, all but three states have either reopened to a degree or plan on reopening soon. The final three states that have yet to open and do not have set plans to open are Illinois, Delaware, and New Jersey. As the weather gets better, more people are out and about waiting for takeout at their favorite local restaurants and eating the food in grassy public areas. So far, the U.S. government has not identified any spikes in COVID cases in states that have reopened. 

  5. With states reopening and the weather improving, airport travel jumps to a two-month high, indicating economic activity. With summer around the corner and COVID concern dying down, travelers are getting back into the air. This Friday, the Transportation Security Administration (TSA) recorded a two-month high in airport travelers. While this number is still down 88% from a year ago, increase in air travel demonstrates confidence in ability to combat COVID.

With the Feds' confidence in the economy and Moderna's exciting vaccine announcement, where does that leave the markets? WX Capital was confident that positive news would outweigh negative news in May, but now that positive news is relatively commonplace, we believe the market may recover at a much slower pace. We expect a successful economic reopening with limited spikes in COVID cases and believe that vaccine development for COVID is more of a matter of when rather than if. We also believe that biotech will likely be the industry with the greatest return potential in the near future. Check out the two of our recommendations coming out this weekend!

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