Volatility may be easing while vaccine hopes rise.
Losses apparently slowing – but will it last?
Last week, payroll data revealed that JobKeeper is working as intended with an apparent slowing of job losses. Head of Labour Statistics at the Australian Bureau of Statistics Bjorn Jarvis said the week-to-week changes are smaller than they were early on in the pandemic. There has been a higher than expected take-up of the JobKeeper subsidy. This has resulted in more workers staying employed which should aid an eventual recovery.¹
Another indicator of easing conditions is the Volatility Index (VIX), a measure of the US stock market's expectation of volatility based on S&P 500 index options. Market volatility is down substantially from mid-March peaks - hopefully a sign of things to come.
So why now? Mid last week, a wave of optimism swept Wall Street with raised vaccine hopes. US stocks were up almost 4 per cent higher, signalling a strong start to Australian trade.³ This was off-the-back of US drugmaker, Moderna announcing positive results from a human trial of a potential vaccine for COVID-19. Moderna said all 45 participants in a phase-one trial had developed coronavirus antibodies and was the first to report data from a human trial.³
The optimism was fleeting, however, with a slump later in the week after reports questioned trial results.⁴
This leads me to my next point:
Healthcare companies are rising to the challenge
As part of our screening process and ethical investment policy, we are committed to investing in companies that do good not harm. Through our positive screen we focus on healthcare and are thrilled to see that stocks within our portfolio are making a positive impact and rising to the coronavirus challenge. The alignment of positive impact plus the robust earnings outlook has resulted in an overweight position in healthcare for our Australian and international equities portfolios. This ensures we do well, while doing good.
Notably, leading global biotech company, CSL, and pharmaceutical company, GlaxoSmithKline (GSK), have been working on vaccines or COVID-19 treatments. GSK has recently joined forces with Sanofi to rapidly scale up manufacturing and this ‘unprecedented’ collaboration has resulted in the largest vaccine manufacturing capability in the world. ⁵ They expect to conduct human trials within months using their hi-tech vaccine. The benefits of this collaboration is two-fold; it will increase testing capability and if a vaccine is successful, they are equipped to manufacture the hundreds of millions of doses that will likely be required worldwide.
Richard Hatchett, the chief executive of the Coalition for Epidemic Preparedness Innovations (Cepi), which is funding the development of eight vaccine candidates, said: “The combination of Sanofi’s recombinant technology, which will allow the rapid generation and production of vaccine, with GSK’s proven adjuvant technology, which will allow more doses to be generated from a given production volume, will speed the delivery of vaccines to the world.”⁵
CSL has also been working hard over the last few months to safeguard people, patients and donors by providing critical medicines to patients throughout the world. They have joined with other leading plasma companies to form the CoVIg-19 Plasma Alliance, an unprecedented industry collaboration with the goal of developing and delivering CoVIg-19, a potential plasma-derived therapy for treating those with serious complications from COVID-19.⁶ They have also partnered with SAB Biotherapeutics, a clinical-stage biopharmaceutical company, to advance and deliver a novel immunotherapy targeting COVID-19.
Examples such as these align with our ethos – to invest with purpose. Not only are these companies delivering financial returns but they’re looking for ways to help overcome global challenges. Speaking of overcoming global challenges, we wanted to mention again the ethical imperative of downloading the COVIDSafe app – an initiative we are behind in order to safeguard our own employees and wider community of stakeholders.
You can download the app by clicking here for Android, or here for Apple.
Until next week, we hope you stay safe and happy.
David Brennan, Director – Distribution
¹The AFR, ‘Payroll data shows job losses slowing,’ published on 19 May 2020, accessible at: https://www.afr.com/policy/economy/payroll-data-shows-job-losses-slowing-20200519-p54ubm, accessed on 20 May 2020.
²Google, ‘VIX Index,’ published on 19 May 2020, accessible at: https://www.google.com/searchq=vix+index&rlz=1C1GCEB_enAU885AU886&oq=VIX+index&aqs=chrome.0.35i39j69i60l2j0l3.1435j0j4&sourceid=chrome&ie=UTF-8, accessed on 20 May 2020.
³The Market Herald, ‘ASX Today: Big open ahead as vaccine hopes lift Wall Street,’ published on 19 May 2020, accessible at: https://themarketherald.com.au/asx-today-big-open-ahead-as-vaccine-hopes-lift-wall-street-2020-05-19/, accessed on 20 May 2020.
⁴The Sydney Morning Herald, ‘Wall Street slumps as Moderna shares dive on report questioning trial results,’ Published 20 May 2020, accessible at: https://www.smh.com.au/business/companies/wall-street-slumps-as-moderna-shares-dive-on-report-questioning-trial-results-20200520-p54ull.html, accessed on 20 May 2020.
⁵The Guardian, GSK and Sanofi join forces to work on coronavirus vaccine, published on 14 April 2020, accessible at: https://www.theguardian.com/science/2020/apr/14/gsk-and-sanofi-join-forces-to-work-on-coronavirus-vaccine, accessed on 20 May 2020.
⁶CSL website, ‘COVID-19 Update, published on 4 May 2020, accessible at: https://www.csl.com/news/2020/covid-19-update, accessed on 20 May 2020.
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