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Stocks are recovering from their coronavirus-induced losses so quickly that even several of the world’s biggest investors are being proven wrong. 

Two things broadly explain the speed of the snapback: the government’s swift delivery of stimulus to Americans of all income levels, and the steady progress that pharmaceutical companies are making towards unleashing an effective vaccine

That second catalyst is why investors are anticipating a permanent solution to the worst global health crisis since the 1918 Spanish flu. A vaccine would help rebuild economic activity that has been on ice since the first quarter, and turn around the fortunes of companies that have experienced sharp losses since then. 

But it is possible that a vaccine will not immediately be the silver bullet that Wall Street expects. Andrew Lapthorne, the global head of quantitative research at Societe Generale, is taking this view with a word of caution on what it means for a stock market that has already overshot.

“With questions on the effectiveness and wide availability of vaccines remaining, as well as the potential impacts of the pandemic’s damage to the economy, there may be more downside risk from markets overshooting,” Lapthorne said in a recent note.  

Read more: BANK OF AMERICA: Buy these 7 pharma stocks now as they race to develop COVID-19 treatments and vaccines

His concerns are both market- and vaccine-related.

On the market front, he thinks investors are taking a premature victory lap that is out of line with historical recoveries, even after considering that stocks had plunged at record-breaking speed. On average, the S&P 500 recovered by 27% within a year after all 15 drawdowns of at least 30% since 1929. This time around, stocks leapt 45% in four months.

When it comes to the vaccine, Lapthorne has four specific concerns that throw cold water on the silver-bullet narrative. 

First, he flags that despite the nearly 200 vaccines under development, there is no guarantee that any will be effective on a massive scale. He also says that HIV still does not have a vaccine, although it’s worth noting that there are treatments to keep people living with it healthy.

Second, there is no guarantee that the vaccine will be widely available. Lapthorne cited a survey conducted by Lazard, which showed that 73% of healthcare executives do not expect an effective vaccine to be accessible before the second half of 2021.

Third, there will be people who decline to get vaccinated because they are anti-vaxxers or they doubt the safety of a COVID-19 vaccine. These folks may slow down the process of ensuring that herd immunity is achieved. 

Fourth, it will take some time for people to unlearn their new pandemic habits and return to pre-COVID behavior even after a vaccine is available. Those habits include traveling by public transport, attending social events, and in-person gatherings — all of which help drive company revenues and overall economic activity.

Given these potential limitations of a vaccine, Lapthorne concludes that the stock market could be pricing in an economic recovery that will end up being less impressive than expected. 

“The long-term deleterious economic after-effects of pandemics could span multiple decades,” Lapthorne said.

And unfortunately, history does not provide any clean parallel for what happens to the economy or the stock market after pandemics. The Spanish flu arrived just as World War I was ending, so it was a double whammy quite unlike what we’re experiencing now.

But one thing is more certain to Lapthorne: Investors, in their forward-looking nature, have a habit of declaring victory before battles are over. And this rally could end up the history books as another example.

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