Who could have imagined that the entire universe of U.S. stocks would someday trade like the shares of a small pharmaceutical company with a supposed miracle cure for cancer in the works? That, evidently, is what Wall Street has become: a drug-stock crap-shoot-on-steroids. The Dow Industrials shot up more than a thousand points Monday on word that a vaccine from Moderna was showing promise in initial tests on humans. To understand how far the Cambridge MA-based firm is from defeating Covid-19, consider what Bloomberg news had to say: “The vaccine trials are being conducted in stages, with the first test designed only to look at safety and whether or not the shot created lab markers of an immune-system response. Only in later stages of testing, to be conducted in thousands of patients starting in July, will the vaccine go up against the virus in the real world in a definitive test of whether it prevents or lessens infections.”

What Could Disappoint?

Ah, the real world!  What could possibly go wrong between now and July to disappoint investors? For starters, the drug could prove to be a total bust. That would not be unusual in the annals of drug testing. In fact, it is far more unusual when such disappointments do not happen. Considering speculators’ rabid exuberance on Monday for what is at best a longshot bet, disappointment in this case could cause shares to shed ten trillion dollars of value in day or two, in a global cascade that would make the 1929 Crash seem like a burp. To repeat: Big disappointment are the norm, not the exception, in the world of experimental drugs. Moderna’s efforts are inspiring boundless overconfidence simply because speculators are conflating the urgency of finding a cure with the likelihood of succeeding at it. It is assumed that because developing an effective a vaccine is the most urgent business of the world right now, that the combination of ten thousand scientific geniuses, unlimited venture capital and complete docility from the regulators is certain to produce a winning drug. But consider that untold sums of money and more than a hundred years of intensive research have yet to produce a cure for the common cold.

Don’t expect such concerns to weigh down stocks, though, especially since the vaccine ‘story’ extends to ostensibly promising efforts under way in China and the University of Oxford. The rally could continue for yet a while longer, but it is already close to discounting a return to economic normalcy that is far more preposterous, even, than a global population made immune to Covid-19 ‘soon’.