Breakdown of the latest developments on the global exchanges
May 19, 2020, 1:06 PM GMT

Moderna INC. and the Uncanny Market Optimism that Can Be Detrimental in the Long Run

Moderna, Inc. is an American biotechnology company based in Cambridge, Massachusetts.

In an unprecedented turn of events from yesterday, the US biotech company Moderna INC. triggered an over 3 per cent daily gains for most major indices on the news that the company is getting closer to developing a vaccine for the novel coronavirus.

Moderna announced a successful conclusion to the first rounds of clinical trials for its potential SARS-Cov-2 vaccine. This excited investors and traders alike, resulting in yesterday's stock market rally during which Moderna's shares soared with more than 20 per cent.

The excitement, however, might be proven premature and short-lived. The medication was reportedly provided to several volunteers with eight of them developing antibodies, which is the benchmark against which the efficiency of any potential vaccine is going to be tested.

These results are promising, but it should not be forgotten that Moderna is still in the early stages of the developmental process with more clinical trials scheduled ahead.

Much more concrete evidence is needed before final victory can be declared. Yet, the market is acting as though the war against COVID-19 is drawing to an end.

In one way, yesterday's developments have underlined the massive responsiveness of the market to any news concerning the coronavirus pandemic. This, in turn, is making the market quite unpredictable, as the overall speculation rates are increasing fast.

It would not be an understatement to assert that yesterday's rally is more reminiscent of an inflated speculative bubble than a solid bullish run. This is so because traders' optimism and expectations for the future are changing faster than the market is capable of assimilating the news.

The final product of all of this is the tremendously increased overall uncertainty in the market, which could potentially turn into a ticking timebomb.

If the market is ready to jump by more than 3 per cent in a single day on inconclusive data from a single company, then an even more detrimental crash can be anticipated to take place on any discouraging news, thereby bursting the aforementioned bubble.

Meanwhile, the biotechnology sector continues to drive higher the US technological industry as a whole. As can be seen on the chart below, the Nasdaq index continues to outpace the S&P 500 composite.

This trend was established during the last earnings season when most technological companies reported solid gain as a whole. It can also be seen how Moderna's shares, which have increased by more than 300% over the last several months, soar way above the industry's average.

This is quite telling of investors' interest surrounding the company, but could also be perceived as evidence of the aforementioned speculation, currently taking place in the stock market.

Moderna vs S&P500 vs Nasdaq