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Published: May 11, 2020 at 3:40 p.m. ET, By Michael Brush<\/p>\n
We\u2019re all virologists now, right?<\/p>\n
Well, maybe just enough to be dangerous, as the saying goes.<\/p>\n
While investors have driven a rally in the Dow Jones Industrial Average DJIA, S&P 500 Index SPX, and Nasdaq Composite Index COMP since the late-March lows, it\u2019s ominous that people who know a lot more about science than the rest of us are scratching their heads about the optimism.<\/p>\n
They caution the coronavirus pandemic is nowhere near over, and it\u2019ll come back with a vengeance after any summer lull. If they\u2019re right, the current market rally is suspect because that\u2019ll be bad for the economy. It\u2019s particularly noteworthy that many of the skeptics come from the normally buoyant and bullish sell-side analyst community.<\/p>\n
Take Morgan Stanley biotech analyst Matthew Harrison.<\/p>\n
\u201cWhile we understand the desire for optimism, we also caution that the U.S. outbreak is far from over,\u201d he says. \u201cRecovering from the acute period in the outbreak is just the beginning and not the end.\u201d<\/p>\n
Harrison cautions the end won\u2019t arrive until a vaccine is available, in spring 2021 at the earliest.<\/p>\n
\u201cWe stress that only a vaccine will provide a true solution to this pandemic,\u201d he says.<\/p>\n
Reopening the economy, which began in some states late last week, will be a long and drawn-out affair that involves turning various forms of social distancing on and off in a trial-and-error period, he says. Many employees won\u2019t be able to go back to work during this phase.<\/p>\n
And large venues including sports arenas, concert halls and theme parks will stay shut, or have attendance capped. Economists at Morgan Stanley predict the economy won\u2019t return to pre-COVID-19 levels until the fourth quart of 2021. No V-shaped recovery \u2014 a quick down-and-up \u2014 in their forecast, in other words.<\/p>\n
Next flu season<\/strong><\/p>\n Virologist Michael Mina, a medical doctor and assistant professor of epidemiology at Harvard University, cautions that the COVID-19 could easily come back with a vengeance next flu season, possibly causing another shut down of the economy. It could spread even faster.<\/p>\n The reason is there will be thousands of cases smoldering throughout the country that could serve as starting points for the spread, as opposed to a much smaller number from the get-go last winter.<\/p>\n \u201cWe could see very rapid transmission, even faster than the first time,\u201d he says.<\/p>\n Jefferies biotech analyst Michael Yee is also cautious.<\/p>\n \u201cWe understand that the market wants to embrace the light at the end of the tunnel, but it is probably not that simple,\u201d he says.<\/p>\n He says we need to see a lot more progress on therapies and vaccines before we can fully open up the economy and ease off social distancing.<\/p>\n