Two Steps Forward, One Step Backwards
The surge in Covid 19 cases unnerved investors this past week, which is understandable. People did get complacent as various states reopened, particularly those that hadn’t been hit hard when the pandemic first arrived in the U.S. So infections spiked notably in places that hadn’t previously been subjected to large numbers of cases. At a minimum, the several day incubation period of Covid 19 insures that case counts will rise further over the next week
or two. If people respond by wearing masks and taking the risk more seriously, we should see case counts falling again in mid or late July. In the meantime, the economy seems to have bottomed and is starting to recover. Critically, policy remains very focused on promoting that economic rebound.
The surge in cases of Covid 19 is not at all a second wave. It is really part of the first wave, but reflects a transition from regions more heavily affected early on to areas of the country that were only lightly affected. We have also learned a great deal about the virus with mixed effects. We now know that young people are unlikely to die from the illness, reinforcing their sense of invulnerability, so they quickly resumed normal behavior as states emerged from lock down. As large numbers of the young in states previously only mildly affected have caught the virus, the average age of those becoming ill has plummeted. From March 1 to June 15, the average age of those infected fell from 65 to 35 in Florida, so the recovery rate should be quite high, especially as treatments also seem to be improving.