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The science behind the story

5 min read
Ben Kumar, Head of Equity Strategy24 Jun 2020

There is a lot of misunderstanding of science going on right now. Researchers are publishing COVID-19 reports with various attempts to understand and control it. Since most of them are academics, these papers err towards scientific caution; “there are some signs in this limited sample that the treatment is somewhat effective”. However, this gets broadcast to the wider world as “CURE DISCOVERED.”

Healthy intellectual scepticism is what drives scientific progress - also a good attitude to apply to investing. We consider progress in the four main areas of the battle against COVID-19 with this in mind, stripping out the media exaggerations and hysteria.

Healthy intellectual scepticism is what drives scientific progress - also a good attitude to apply to investing.


Treatments don’t stop COVID-19 from spreading, but they are vital in helping the worst affected people to recover from it. Various COVID-19 treatments are starting to go through clinical trials. These have been developed very quickly, piggybacking off previous work by taking existing treatments and tweaking them slightly.

It’s becoming increasingly obvious that treatments for coronavirus need to be applied in two phases (or biphasic). In the early phase of the infection you need something that will target the virus, while later on you need something that treats the symptoms.

Remdesivir, a drug originally developed by Gilead Sciences to tackle Ebola, is being used in the first phase and tackles the virus itself, taking aim specifically at SARS-CoV-2 (the particular strain associated with COVID-19). Technically called a nucleoside analogue, this type of treatment aims to stop or interrupt viral replication – stopping the virus from multiplying and infecting more cells in the body, and helping the immune system to tackle the problem.

The second phase of treatment deals with the symptoms, rather than the virus. Dexamethosone, a drug being trialled in the UK, is one of these. When someone is critically ill from COVID-19, all sorts of things start going wrong in the body - the immune system can eventually start attacking the bodies’ own cells. Drugs like dexamethasone dampen down inflammation and the immune response, hopefully preventing critically ill patients from dying.

Treatment development is being explored by lots of companies and labs worldwide. With so many different kinds being trialled, more and more effective solutions will be discovered. However, such treatments don’t stop people from catching the virus in the first place.


Developing an effective vaccine is the offensive step needed to end the COVID-19 crisis permanently. If enough of the population becomes immune, then the virus can no longer spread. It will die out – just as smallpox did in the late 1970’s.

However, developing a vaccine isn’t easy. Historically, over 90% of potential vaccines fail at some stage of development. The good news is that no virus has ever been the subject of this level of focus and funding. The bad news is that there is still an element of luck involved. There are many people looking for the needle in the haystack, but we just don’t know when the needle will be found and how effective it will be.

Of course, finding a vaccine is only the first step. The next, and possibly even more difficult step, is mass production. Without knowing exactly what the composition of the vaccine will be, it’s difficult for businesses to gear up and produce what will likely be billions of copies. Unlike face masks, we can’t just ask Rolls Royce and Dyson to start making vaccines.

After that, there is distribution and administering of the drug. Global vaccination, even if the discovery was tomorrow, would still take months to implement, or even years.

That doesn’t mean there isn’t hope – we are reasonably optimistic that a vaccine will be found eventually – but timelines are important too. Be wary of news reports suggesting a cure is going to be found and applied soon.


A couple of recent studies found that COVID-19 antibodies (the bit of your immune system that does the fighting) were not as high as expected in those who had recovered from the disease. This immediately prompted articles panicking about the practicality of “immunity passports” and the speed of herd immunity.

This is another example of the scientific facts being obscured by the media headlines. Both studies were somewhat limited in their analysis, focussing just on specific antibodies rather than the broader immune response. In addition, the widely-cited Nature study only used a small sample of patients, and drawing general conclusions from such a small cohort should be done very cautiously.

It is perfectly possible that some people had lower antibody counts because they are already partially immune to COVID-19, or because their immune systems are extremely effective. So more work is needed before reaching any bold conclusions.

Second Wave

The first wave of COVID-19 was met at varying speeds around the world, with the Hammer of lockdown. The majority of nations have now reached the Dance stage, where governments try to open up their economies without initiating another wave of the virus.

However, if there is no vaccine and no herd immunity, there could well be a second wave of COVID-19 in the next few months, although again, this is just a theory. This is where epidemiology starts to collide with our investment views.

When we think about what a second wave might mean, we believe that we can use the first wave as a template, and incorporate the developments in treatments mentioned above. We don’t believe that a second wave will result in the Hammer being applied in the same way as at the start of 2020.

Healthcare systems are better prepared to manage COVID-19 patients, and the treatments mentioned above give them more ammunition in the fight. Moreover, governments are monitoring the spread of the virus far more closely than a few months ago, and should be warned if it surges again. They’re highly unlikely to move back towards stringent lockdown, though will tighten the social distancing and other rules again if necessary.

If things do get materially worse, we suggest that the countries that locked down successfully the first time will do so again. East Asia, Australia, New Zealand and most of Europe will again do whatever it takes to contain the virus as quickly as possible – Beijing being a good example of this over the past few weeks. The US, UK and Southern Asia will be slower to react, and the rest of the world may still be dealing with the first wave.

As such, we like our key growth themes in Asian high yield and European dividends. In the US we have a more defensive thematic exposure, preferring US healthcare companies to the broader index.

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