As hundreds of companies race to develop vaccines and drug therapies that could help end the COVD-19 pandemic, new reports of successful and mostly unsuccessful drug trials are swaying the broader equity markets. Understandably, the economic effects of COVD-19 on the world economy have stirred up investors emotions, but it’s important to not get sucked into the everyday news headlines.
Here are a few key points to keep in mind before making investment decisions based on vaccine related headlines.
- Vaccines take years, often decades, to be created and permissioned for medical use. For example, the first approved Ebola vaccine was patented by the Public Health Agency of Canada in 2003. However, the vaccine was only recently approved for medical use in the European Union and United States at the end of 2019.
- When developing a vaccine, clinical studies occur in three phases. Despite the urgency, vaccine candidates for COVID-19 cannot skip any of the three crucial phases. As such, many health officials believe it could take 12-18 months at the earliest if a vaccine is discovered.
- Even if a vaccine is quickly discovered and completes all three phases of clinical studies, there is no guarantee that a new vaccine will receive regulatory approval.
Unfortunately, headline-induced price swings suggest that investors are indeed making decisions driven by hope and fear with limited information on hand. As with any investment, it’s important to make a realistic assessment of an investment’s long-term earnings potential and whether a specific investment fits your long-term strategy, time-horizon, and risk tolerance.