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No way. Who hoped that the unexpected hitch on the road of the Astrazeneca vaccine towards approval had brought some sense and judgment on the financial markets was disappointed. The European stock exchanges, and not only, continue with the gallop towards new records, as if the real economy – that of factories, bars, restaurants and offices – were ready to restart without problems. But above all as if the vaccines had already defeated Covid and everything could return to the way it was before. In conclusion, business as usual. Instead, not only is this not the case but the worst thing is that this detachment from reality can be very dangerous: economic history teaches that in these cases it is very likely that financial bubbles will form, and when bubbles are formed sooner or later they burst; and when they explode there is someone who gains and many who lose.
The history of the Oxford-AstraZeneca vaccine is very indicative of how much the euphoria of the markets is at least greatly exaggerated. In fact, the company had to admit on Thursday that there were problems with the relationship between doses and efficacy of the serum and that therefore there is a need for additional tests. The next day, Friday, she was quick to point out that these further steps should not lead to delays in the roadmap towards approval, however, but we are still in the world of hypotheses. In any case, the story teaches that it is too early to be able to give Covid for dead already at the hands of a vaccine. First of all because at present none of those in the most advanced phase of experimentation have been authorized, neither in Europe nor in the United States. And secondly, because mass vaccination requires a massive organizational effort, which at best takes at least a year if not a couple of years. To be clear, Italy alone should vaccinate at least 42 million people to achieve herd immunity or the only turning point to be able to truly return to life as we knew it before the virus.
Despite the “English lesson”, however, the markets already seem having served the death of Covid. The Dow Jones index of Wall Street sails above 30 thousand points, in Europe the stock exchanges are driven by stocks of the old economy such as banking, oil, cars and commodities, Piazza Affari is reported above 22 thousand points as last February, the spread between Italian and German bonds was at its lowest for 4 years. Behind these results is what analysts call market rotation: traders have begun to invest in those traditional industries that had been put in difficulty by the virus and lockdowns, to the detriment of the more innovative ones – especially the technological ones – which in these months have seen prices soar. An attitude, that of traders, which however has little to do with indicators of the real economy, given that we are in the middle of the second wave and no one can exclude a third one next year: it is no coincidence that the business and consumer confidence indices are still oriented downwards.
How is this discrepancy possible? He explains it well Emilio Barucci, professor of Mathematical Finance at the Politecnico di Milano. “There are two structural factors and one psychological. Let’s start with the first two. First of all, there is a high level of liquidity on the markets due to the great support given to the economy by Central Banks and therefore it is normal to meet investors looking for riskier opportunities. In addition, a good part of this liquidity is invested through automated strategies, those that are usually summarized under the banner of ‘algorithmic trading’. In other words, a part of the decisions is taken through the use of specific software. Well, these decisions are much more sensitive to news – for example the news of vaccines – than a human being would. These two factors inevitably lead the markets to overestimate what is happening in the world, both positively and negatively. To these must be added the third, the psychological one. Behavioral finance scholars are well aware that stock traders – as well as humans in general – tend to have short memories and be too optimistic about the irrepressible urge to return to normal during difficult situations. This irrational attitude therefore leads to amplifying the two effects we discussed earlier. With the final result we see these days “.
And with another that could materialize in the coming months: the bursting of a financial bubble, not necessarily powerful and lasting, even short and impromptu. Classic side effect of the disconnect between real and financial economy. And for which a 100% effective vaccine has not yet been invented.
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