August 7, 2020

COVID-19 : Tracking the Recovery August 7, 2020

During the last two weeks of July, Coronavirus cases continued to rise across most states. Several states registered new daily highs during the period. Most notably, Texas, Florida and California saw daily totals well in excess of 10,000 cases. Several other states experienced notable increases in daily totals, including Georgia, Arizona, North Carolina, South Carolina, Alabama and Tennessee. At the peak, daily new cases average roughly 75,000, well in excess of the 45,000-level reached during the initial wave of infections that impacted the Northeast region.

During this time several major healthcare systems reached capacity and began utilizing auxiliary care locations to manage the flow of patients who needed various levels of care. Mortality rates began to increase, however thus far the increase is proportionally far lower than what was experienced in the Northeast and appears to have leveled off over the past two weeks.

As infection rates increased several states took action to mitigate transmission, which included pausing plans to continue opening various areas of the economy, mandatory mask policies, reducing the size of gatherings or implementing travel restrictions. Even in the Northeast, where infection rates remain relatively low, travel restrictions have been implemented to reduce the potential for spread from other parts of the country.

Fortunately, the national data thus far in August has been moving in the right direction. Daily case counts have fallen to roughly 55 thousand per day since the beginning of the month. Hopefully, this will ultimately provide some relief to some regional healthcare systems that have been stretched to capacity. According to New York Times tracking data, over the past two weeks, 9 states reported increasing infections compared to 28 states in the same category last week, while 17 states reported declining rates.

On the healthcare front, the race to produce an effective vaccine has resulted in two very promising possibilities from Pfizer and Moderna. Both companies are now in the final “Phase 3” testing with their vaccines and expect results by the end of October. There are several other companies with vaccines in Phase 2 testing. National Health professionals now appear more confident about the prospects of a vaccine prior to year-end or at the beginning of 2021. In anticipation of (a) successful trial(s), the Federal Government is flowing billions of dollars into production capacity so that when approved, capacity will be available to mass produce the successful vaccine(s) for distribution. It now appears that several states are timing their recovery to “normal activity” with the development and availability of a vaccine.

Meanwhile, most of the programs instituted by the government to keep the economy moving have lapsed. At the time of this writing Congress has yet to pass the next round of the “CARES ACT” which we believe is necessary to continue supporting economic activity at the consumer level. Increasing infection rates and delays in reopening have elongated the recovery time period and requires more action on the part of the Federal Government to ensure a base level of economic activity until the private sector can fully re-engage and pick up the economic baton. The President has now taken the route of signing Executive Orders on stimulus with Congress at a stalemate.

While several economic data releases including; manufacturing, employment, and housing continue to suggest a recovery from the nationwide shutdown, the pace of improvement suggests a prolonged period of recovery as opposed to the sharp V-shaped recovery many had hoped for. The current path is consistent with our initial view, but also suggests more policy action is required to continue. While the federal deficit will be a point of concern in the future, the present circumstances related to COVID suggest more action is needed to avert more harmful economic damage.