Pricing Bird Flu, Inefficiently

Since it was formally coined in 1970, the Efficient Market Hypothesis has been both the banner and the sword of Neo-Classical economics.¹

EMH weaves all the salient points of contra-Keynesian thought into a single mantra: rational, independent actors will inherently maximize their self-interest given equal access to available information. Thus, markets unleashed from the invisible hand of big, meddlesome government will inherently move to reflect and express the reality of any given moment in the elegant language of price.

As an idea, Efficient Market Hypothesis has lived an interesting life. Qualified, modified, dissected, mutated, and misappropriated, a flexible version of the theory endures as a nod to the fact that stocks integrate reality into their prices. Cliff Asness has even developed a “Less-Efficient Market Hypothesis” to bend the theory into a framework that accounts for variations in informational efficiency.²

These pragmatics not withstanding, unalloyed Efficient Market Hypothesis enthusiasm lives on as the standard for a pack of influential fundamentalists who have built personal and political philosophies around the idea that a totally free market can be an instrument of hyper-efficient informational integration.

Their moment has come, it would seem, with the arrival of the second Trump Administration. As regulatory capture reaches its zenith and the lever-pullers responsible for economic planning find themselves increasingly furloughed or beleaguered, there has never been a better time to assess the viability of the Efficient Market Hypothesis.

This opportunity is pregnant with potential. Not only because the intellectual heirs of Milton Friedman and FA Hayek have seized control of the United States government, but because the market they hope to emancipate is simultaneously challenged with an incredible threat: H5N1 bird flu.

THE MARKET

For the last eighteen months, the S&P 500 index has experienced steady gains mixed with important corrections.

The primary driver behind the market’s narrative arc has been a season of post-COVID inflation that the Federal Reserve has doggedly countered with a prolonged policy of quantitative tightening. Donald Trump’s anticipated advocacy for lower interest rates and a defanged SEC, among other positions, manifested in the weeks after his 2024 election. The S&P 500 broke through resistance at 5,800 and hovered above 6,000. From late February into March, a severe correction occurred as the severity of Trump’s “external revenue service” tariff plan and DOGE purges shocked markets built on the premise of free global trade undergirded by a robust Federal government.

The grand shape of this story is nuanced with the serrations of day-to-day trading. Tough earnings reports, disappointing unemployment figures, fortuitous deals, unforeseen capital windfalls and an ocean of similar minutia created texture and topography on the slopes of the market’s major moves.

In its every undulation, this jagged line seems to corroborate the principle of the Efficient Market Hypothesis. A mosaic of information is being integrated into a causal roller coaster that organizes minor perturbations into major trends.

BIRD FLU

Throughout 2024, heightened reporting on H5N1 steadily wove the prospect of a new pandemic into the usual gumbo of market-relevant data. This outbreak dates to 2003, but 2024 found the virus garnering fresh coverage as alarming new data gained an eerie resonance with the lead-up to COVID-19.

In April, the virus was detected in Texas dairy herds. Subsequently, two laborers who worked with the infected herds contracted the virus. One of whom became the first H5N1 victim to exhibit respiratory symptoms.

Further ill omens emerged in November as H5N1 made the jump to the United States’ pig population, which was interpreted by many as proof of a mutation that made the virus more suitable for human transmission. Later that same month, a California child was infected was bird flu. In mid-December, a severe case emerged in Louisiana. That patient died on January 7, 2025.

Broadscale testing by the USDA and focused studies by state governments provided a raft of data attesting to the growing threat of H5N1. That pipeline changed drastically on January 20, 2025 when Donald Trump was inaugurated as President of the United States.

Amidst the DOGE-administered culling of Federal payroll, a large section of the USDA office responsible for monitoring H5N1 found themselves suddenly unemployed.³

Though the USDA’s Highly Pathogenic Avian Influenza (HPAI) reporting site is still active, the data it provides leaves much to be desired. As Bloomberg columnist Lisa Jarvis opined in May of 2025, trusting the government to test and report reliably is a hard sell.⁴

The informational pipeline that would hypothetically feed an efficient market depends on the foundational symbiosis between government monitors and the fourth estate. New reports from reputable sources seed fresh news coverage. No new data means no new stories.

Where 2024 saw a raft of reporting about transmission, mutation, and all the other points of interest inherent to a budding pandemic, financial news coverage of H5N1 after Trump’s inauguration was limited to a spate of stories about egg prices.

Between Bloomberg, Yahoo Finance, Barron’s, and Market Watch, twenty-seven stories about bird flu have been published since Trump’s inauguration. Of that number, fifteen are either partner content or advertorial hawking investment opportunities.

A lack of secondary reporting on primary data affects popular tertiary market discourse in places like Reddit’s much-lauded viper’s pit of financial contrarianism, r/wallstreetbets. Since early 2024, postings on that subreddit about H5N1-related investing strategies mostly derive from initial posts featuring formal news stories about bird flu. Concurrent to last year’s influx of bird flu stories, a lively dialogue advocated for novel market moves.

User Bloodhound1144 advised fellow investors to prepare for milk shortages while user IJesusChrist(am a Pedophile) correctly predicted the coming demise of Moderna’s stock price. Of twenty-seven posts discussing bird flu in the last eighteen months, only three have appeared since Trump’s inauguration.

EFFICIENCY or IGNORANCE?

Efficient Market booster extraordinaire FA Hayek described efficient markets as decentralized “telecommunications networks” for information, or “a system where the knowledge of the relevant facts is dispersed among many people” where “the whole acts as one market, not because any of its members survey the whole field, but because their limited individual fields of vision sufficiently overlap so that through many intermediaries the relevant information is communicated to all.”

Put in the parlance of bird flu, relevant information resulting from the rise of H5N1 would have coursed through a plurality of sources and aggregated in pricing. This, of course, assumes that H5N1 was impervious to the change of presidential administrations and continued to spread and mutate in a consistent fashion with its previous growth patterns.

By Hayek’s reasoning, independent, rational, and self-interested actors with snapshots of information would begin to integrate that knowledge into the market with investment moves. How would that look?

From an idealized perspective, public companies with extensive exposure to the assets most likely to be negatively affected in a zoonotic pandemic—cattle, swine, and chickens, to wit—would experience downward pressure in both volume and price. Pilgrim’s Pride (PPC), Tyson’s (TSN), and Hormel (HRL) represent the most likely basket of such stocks.

On the flip side, companies trafficking in proven solutions to pandemic health concerns would be ideally suited to gain both volume and price. Roche Pharmaceuticals (RHHBY), whose Tamiflu anti-viral is proven against Avian Flu, as well as Moderna (MRNA) and Pfizer (PFE), vaccine manufacturers who provided the lion’s share of immunological wherewithal for the COVID-19 pandemic.

Financial reporting, a crucial medium between government data and market integration, crystallized in 2024 around two primary scenarios: the culling of food herds and posturing towards a preemptive immunological solution to an H5N1 crisis.

If the market were beginning to integrate information about a budding pandemic into efficient pricing, it’s reasonable to expect that the new paradigm would reflect itself in downward pressure against companies burdened with heavy livestock assets and upwards momentum for proven providers of pharmaceutical solutions.

Instead, the period between January 1, 2024 and July 1, 2025 found Roche Pharmaceutical and Pfizer trading in a similar price bracket and trend line to Tyson’s Food, Pilgrim’s Pride, and Hormel. Moderna, by contrast, experienced a roller coaster ride in that same time period. The stock swelled to a price above 160 before plummeting to a position below thirty.

For starker contrast, the On-Balance Volume data for Pilgrim’s Pride and Moderna break with any narrative that bird flu is beginning to price into the market in predictable ways. OBV, which measures momentum as a function of price and selling volume, shows Moderna getting clobbered while Pilgrim’s Pride stayed mostly static.

Beta, a technical measuring a stock’s variance from the market, depicts each basket—the pharmaceutical stocks and the food stocks—in a sub-1 range for most of the interval of interest. Both supposedly H5N1 friendly stocks and H5N1 vulnerable stocks performed with a greater stability than the market itself.

These are not strong indicators that the foretold pandemic was reshaping markets via price.

In the Weeds

More ominous than the absence of H5N1 markers in general stock trends is the fact that news cycles reporting salient moments in the development of a pandemic do not seem to be rippling through stock prices in a meaningful way.

The influx of H5N1 in dairy herds in April 2024, the leap to swine later that year, and the death of a farm work from H5N1 on January 7, 2025 were insufficiently impressive to reshape the market.

Instead, efficiency in stock prices could more aptly be described as a hyper-sensitivity to financial indicators. Pharmaceutical and food stocks are similar in that their worst moments over the past eighteen months have all come at the hands of market corrections, missed earnings, bad macroeconomic signals, or product problems.

Roche Pharmaceuticals stumbled most dramatically on sour news regarding one of their trial drugs, general market contraction, tariffs, and RFK Jr.’s nomination.

Vaccine-king Pfizer also faced RFK headwinds and the implications of a broad market downturn. One spate of slightly missed earnings was also hostile.

Moderna, on the other hand, bled out when lower than expected vaccine sales caused analysts to downgrade their stock right as wilted quarterly earnings appeared. Trump’s election, RFK Jr.’s subsequent nomination for Health and Human Services and his eventual confirmation all kneecapped the stock.

Not to be outdone, Pilgrim’s Pride sank on a foul jobs report, interest rate announcements from the Fed, tariffs (they export a lot of meat) and missed earnings.

Tyson’s also missed earnings, suffered from a few disappointing jobs report and got creamed on Trump’s “liberation day.”

Hormel’s worst drop ran concurrent to bad quarterly numbers.

Simply, news from the outside world never impacted bird-flu adjacent stocks in the same way that familiar, easily quantifiable market signals did. When it came to economics lingua franca, the markets were incredibly responsive. Regarding potential black swan factors building on the horizon, ignorance was preferable to efficiency.

Of course, market moves are complex. Unseen volume events, algorithmic trading, 0DTE options and various and sundry other inexplicable or opaque phenomenon could be shaping stock price. What has yet to emerge are clear signals that wall street is alert to or skittish of a growing pandemic.

Closing Bell

Sold by financial wizards as an awe-inspiring act of augury, the efficient market hypothesis can be falsely associated with an idea of bold savants bravely scrying every passing tide and each fleeting omen to fashion a market whose prices mirror the world.

The truth is less sexy.

Descriptions of efficient markets—aware individuals acting in their own self-interest to achieve maximum personal gain eventually self-organizing into a holistic mass of atomized creatures that assesses and prices every threat and prospect to a point of objective focus—is also an accurate description of a herd. It’s not magic. Animals behave this way. Sensations at the periphery ripple through touch and cause the group to shift and move. Friction and instinct are immediate stimuli.

Whether seeking safety or greener pastures, the herd adjusts to accommodate its local reality. There are stampedes from time to time when a wolf appears in the herd’s midst or a bolt of lightning sparks the sky, but the multitude of cloven hooves are mostly content to shuffle and not run until the point of absolute fear arrives.

Any efficiency inherent to a market is unlikely to be attributable to the prescience of the herd. The real marvel is that it finds ways to keep eating even as the grass begins to burn around it.

Sources

1. Fama, Eugene F. “Efficient Capital Markets: A Review of Theory and Empirical Work.” The Journal of Finance 25, no. 2 (1970): 383–417. https://doi.org/10.2307/2325486.

2. Asness, Cliff S., The Less-Efficient Market Hypothesis (August 30, 2024). 50th Anniversary Issue of The Journal of Portfolio Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4942046 or http://dx.doi.org/10.2139/ssrn.4942046

3. Brown, Marcia. “Trump administration struggles to rehire fired bird flu employees.” Politico. 2/27/25. https://www.politico.com/news/2025/02/27/trump-fired-bird-flu-hires-00206334

4. Jarvis, Lisa. “Is the Bird Flu Outbreak in a Lull? Who Knows…” Bloomberg. May 8, 2025. https://www.bloomberg.com/opinion/articles/2025-05-08/bird-flu-outbreak-over-who-knows

Project documentation available [here](https://github.com/StickyFloors/Pricing_Birdflu/blob/main/Methodology.ipynb).