It’s been weeks since small and large businesses, schools, parks and beaches have been shuttered. It seems like a lot longer, doesn’t it? I know that I and my family are feeling the strain.
How about you? Are your ready to venture out again?
While some states, like Florida, have loosened the lockdown, counting on their local leaders and the people to exercise good judgement in maintaining social distancing and other guidelines, others like California, have overruled local leaders and insisted on further patience.
People gathered near the Huntington Beach Pier to protest Gov. Gavin Newsom’s order to close state and local beaches in Orange County on Friday, May 1. Kyle Grillot/Reuters
Source: NY Times[1]
These dissimilar approaches accentuate fundamentally different political styles to forge a strategy that will properly balance the risk to lives, with the risk to livelihoods. That is an extraordinarily tough challenge!
Here is the dilemma; whereas the U.S as a whole has succeeded in flattening the curve, the rate of new cases or new deaths are not receding much.
These curves look different in different communities. Some still on the upslope, while others are on the backside of the hump. And then again, how will things change over time?
On to the economy.
You may have seen headlines showing that U.S. economic growth went negative (-4.8%) in the first quarter of 2020 after 23 quarters of uninterrupted positive growth.[2] This is even though the COVID -19 tsunami did not hit us until the last weeks of the quarter. The second quarter, in which we are currently living, is likely to show an even greater decline, even as the economists at the CBO (Congressional Budget Office) predict a steep comeback in the third quarter. [3] Are they right?
Given the dismal economic reports of the last and current quarters, how come stocks went up? Could anyone have predicted the steep April rise with any certainty?
"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today." --Evan Esar
How can stocks be so disconnected from the economic data? Perhaps it is because whereas economic data looks back at what has already happened, the stock market looks forward at the trajectory of business activity. Framed that way, maybe the market is expecting things to improve from here on?
The pace of recovery will depend on many variables. Notwithstanding the dictates of our political leaders, our economists, or our healthcare experts, if people don’t feel safe going out or opening their wallets, growth could take a long time.
Some countries are beginning to open up. Restaurants are open in Hong Kong but tables are farther apart. Professional sports are back in South Korea but the stadiums are empty as the athletes play. Taiwan has opened their schools, but the smiles and frowns of the children are hidden behind mandatory masks.
How are we going to re-open? When will you go back to your pre-pandemic routine? Hit "reply" and let me know.
Be well,
Daniel Ruben, MD, MPH, MBA
The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.