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The virus is fighting back globally as lockdowns ease

After early victories in the east in South Korea, Taiwan, New Zealand and arguably China, the battle against the pandemic has grown longer and tougher.

After early victories in the east in South Korea, Taiwan, New Zealand and arguably China, the battle against the pandemic has grown longer and tougher.

Charles Stanley

in Features


The Europeans got the number of hospital cases and deaths well down with extensive lockdowns and are now trying to allow more business and travel, without reviving infection transmission too much.

The emerging-market world is suffering badly. Both highly populated India and Brazil have serious outbreaks. World cases are still rising, and the world death rate has now passed 500,000. Whilst the overall total of new daily cases and deaths are below the peaks, in Latin America and North America case numbers are rising. Worse still, there are countries experiencing a second wave after getting the case and death rates down through lockdowns. In Iran, new cases are more than three times the early May low, which followed a bad April. Countries such as Germany and South Korea that had more success in countering the virus, or a less virulent pandemic have also experienced local outbreaks again.

One of the biggest battles is raging in the US. This one matters most to investors, given the dominance of US equity markets in the world index, and the way that much of the investment world takes its cue from Wall Street. US lockdowns helped bring the death rate down from a peak of 2701 deaths on 6 May to 613 on 30 June.

Culture war

In recent weeks, there has been a lively debate about how far and fast the US can go with relaxing the tough controls on movement and activity. This has become, to some extent, party political with Democrats favouring caution to squeeze out the virus more and many Republicans wanting to restore freedoms and livelihoods.

Donald Trump who has been on the livelihoods side of the balance for the duration of the crisis has accepted that the decisions will be made state by state. The Democrats can highlight the troubles in Republican-led states with a worsening position like Arizona, Florida and Texas, whilst the Republicans can remind the country of the high case and death rates in New York, New Jersey and California, which are Democrat-led states.

Dr Anthony Fauci, the US government’s adviser on the pandemic, gave gloomy testimony this week to Congress. He stated that “we are not in control right now”. He highlighted the growth in cases, with several recent days showing case levels of more than 40,000. This compares with a peak of 35,000 on April 4th.

It could, of course, be affected by how many tests are now being done compared to then, after an energetic attempt to raise the testing rate. The four states with the fastest deterioration on these figures are three Republican states, Florida, Texas and Arizona, and one Democrat state, California. There are signs of some Republican Governors shifting to a more cautious position under pressure from the news flow and the advice they are getting from their own medical and epidemiological advisers. New York still has experienced the most deaths and New Jersey a high death rate. Both parties need to be worried.

Distrust of ‘experts’

Dr Fauci complained about all those people in the US who distrust the expert advice, refuse to wear face masks, would be unlikely to accept a vaccine and ignore the social distancing rules. Moderate Republicans seek to build a bridge, by concentrating on finding ways for more people to go to work safely and trying to persuade people including the President to adopt face masks as a precaution. The Republicans are also keen on finding treatments for the disease and stockpiling drugs that can help. The news flow is worrying and will probably put more people off wanting to use hospitality and leisure outlets as they offer services again, and will have some dampening effect on business attitudes towards how much risk they can run with their customers as they do reopen.

Brazil and Mexico are experiencing high levels of cases. In Brazil there was a new case peak on 19 June, led by the two big city-states of Sao Paulo and Rio. In India, the pandemic seems most intense in Delhi and Mumbai, with continuing concern about the rate of new infections and the pressure on health services in those cities despite the early and long lockdown. It is also thought itinerant workers returned to the countryside from the big cities on the lockdown, carrying the virus with them. World Health Organisation advice remains to insist on strict social distancing to limit the spread of the virus all the time there are no better treatments or vaccines available.

The optimistic market view is most countries imposed a lockdown. This brought cases and the death rate right down. Each country can then cautiously relax to allow much more normal business activity to take place, without a major flare-up. This leads to good rates of recovery from very low levels and the hope of a return in due course to 2019 levels of output overall.

Local lockdowns

Output, once recovered, will have a different balance with some sectors scarred by the experience. We need to modify this view in two ways. The first is the evidence that even in countries that seemed to have controlled the virus well, there are flare-ups. The present preferred response is local lockdown. The second is there are now countries that have a serious second wave, with the danger that they have to go through a more extensive and wide-ranging lockdown to counter it all over again.

Local lockdowns are difficult decisions. How far out from the centre of infection does the lockdown extend? What rules govern people leaving or entering the lockdown area that make sense and are accepted by the public? Do you need to restrict bars and entertainment centres near the lockdown area so they do not tempt people from the lockdown?

Markets are going to have to get used to the unwelcome facts that there is still no cure or definitive way of defeating this virus for any country. All the recommended ways of combatting it, are damaging to economies. They are especially damaging to travel, tourism, hospitality and entertainment. These sectors remain at considerable risk. No amount of newly created money and bond-buying can save businesses that are not allowed to trade for too long.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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