As news surrounding the deadly coronavirus rattles markets and investors alike, Nasdaq President and Chief Executive Officer Adena Friedman says there’s no reason to panic. In fact, “capital is part of the cure.”
In a new opinion piece for the Wall Street Journal, Friedman details not only how markets have historically recovered quickly from pandemic threats, but also how they are a necessary means by which some public-health crises are resolved.
Since the 1994 pneumonic plague, there have been at least 10 other health incidents that shook global markets, including the SARS epidemic, as well as the avian flu and Zika virus outbreaks. But in eight of those events, the markets rallied, with stocks climbing by more than 10% after 12 months, once investors had properly reassessed the risk, she noted.
“But markets aren’t merely resilient to public-health crises,” Friedman wrote. “Markets respond to new information during shocks, efficiently allocating capital and allowing investors to express their thinking in real time.”
Amid the current coronavirus outbreak, investors have been flocking to drugmakers working on a cure, including Gilead Sciences (GILD), which has been expanding clinical trials of its antiviral drug initially developed to combat Ebola. Shares of Moderna (MRNA) have also soared after the biotech company recently announced that it had shipped the first batch of a coronavirus vaccine to the National Institute of Allergy and Infectious Diseases, with clinical trials expected to begin in April.
“As of Monday, Moderna’s stock is up nearly 50% since Feb. 3, a clear sign that capital is flowing to medical innovation,” Friedman said.
More broadly, the markets rebounded on Monday on expectations that central banks will cut interest rates, a development that came after the worst week for U.S. stocks since the 2008 Financial Crisis.
“Investors will have to evaluate health-related risks in the weeks and months ahead, and they may well see more volatility,” said Friedman. “But the efficiency of U.S. markets and the diligence of government and industry researchers working to develop a vaccine should give Americans hope.”
To read the full op-ed, please click here.