Gilead Sciences (NASDAQ:GILD) has a promising COVID-19 cure called remdesivir which caused US equity markets to surge on Friday. However, the surge in the stock market on Friday isn’t something justifiable.
Is the economy gearing for fake markets?
For stock markets, it has been a gloomy past few weeks and the economy could receive a boost from positive developments regarding a cure. Most market indexes have been down with the Dow trading below 24,000 points in five days running. The news of a possible cure led to the Dow jumping 264 points on Friday and there is optimism that the possibility of a cure could help the market push higher.
The Federal Reserve’s effort in recent weeks has been incredible and has injected a significant amount to the economy than never before in a bid to shore up the economy. The system has been tricked such that the algorithms can pick headlines to show that things are doing well. Therefore the system will take things like the coronavirus cure headline and the market will such but the system doesn’t think through the issues.
Therefore this could soon result in a fake market where insolvent companies will be trading as empty shell companies. As a result, all this means that the stock market can no longer be relied upon as an indicator of where the economy is headed. For instance, the unemployment rate is at its worst and it keeps rising.
Potential COVID-19 treatment will do little to undo the damage on the economy
With the number of US coronavirus infections being more than 750,000 and still rising approval of Gilead’s treatment could do little to undo the damage. The pandemic has been spreading fast even after cities enforced extreme lockdown measures.
However, a possible cure could slow the unemployment claims but the economy could still take years before normalizes. Before the coronavirus, the economy was gearing for a recession as most retailers were already struggling with consumer sentiment at its lowest. Most of the businesses that were struggling before the pandemic could struggle to reopen.