This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here
While final U.S. election results are not certified, as of this writing, a different type of event with the potential of a massive impact has become definitive: the U.S. has been hit by a 3rd COVID-19 wave. Many European countries are imposing very restrictive lockdown measures. Mexico and the rest of Latin America are in poor COVID straights. Canada, Australia and New Zealand are in much better shape. Their Federal governments followed steps from science.
It appears natural to ask: How is this going to affect the U.S. economic recovery that just started? Are we going to enter another set of state-led lockdowns that might cause similar damage as the first ones in March? Or could this time be different?
The answers to these questions depend to a certain degree on who the tenants at 1600 Pennsylvania Avenue become. But we want to shed light on some factors that are going to play an important role. Regardless.
First of all, the 3rd wave refers to the recent uptick in the weekly confirmed new COVID-19 cases per day.
With 42 states reporting increasing numbers, the daily average of reported new COVID-19 cases is exceeding 86,000 cases per day during the first week of November 2020.
A combination of factors could exacerbate the effects. First, lockdown measures are more relaxed. Second, the weather is getting colder. So more and more social gatherings are taking place indoors. While the first wave appeared to concentrate on the Northeast and the second wave on the south, the third one appears to be predominantly focused on the Midwest.
Nevertheless, it stands to reason — we might see a reinstatement of certain state lockdown measures across the country. And spillovers across state lines are very likely. The political will to impose tighter lockdown restrictions will be closely connected to the vacancies (or lack thereof) in hospitals. As lockdown restrictions will be considered the measure of last resort.
With the U.S. economy just pulling off a record comeback, after the initial March-April-May decline, one might think. Another lockdown would wreak havoc on the U.S. economy. Just like it did in the 2nd quarter. But that might not necessarily be the case.
Consumers have adapted a lot over the last few months. They have shifted their spending habits away from traditional in-person venues to the online alternatives, using contactless delivery or curbside pickup. As a result of this, a fresh form of lockdown (which largely would target social gathering venues, like restaurants and bars) might be limited in its economic effects. For that reason.
Another potential avenue that we might go down? A stricter enforcement of safety guidelines (e.g. wearing masks, maintaining and proper distance, etc.) That could help prevent another lockdown and allow for a more targeted policy. That would allow our governments to get rising COVID-19 cases under control, without having to threaten regional economic recoveries.
Finally, if the election outcome is a win for the Democratic Presidential candidate, with Democratic control of the House, but Republican control of the Senate? We still expect a higher chance for large-scale fiscal stimulus. Senate Majority Leader McConnell stated a package can be done, even before January 2021. That is paramount in our view. To prevent lasting damage from any continued subdued economic activity caused by the virus.
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What's the 3rd Wave Going to Do to a U.S. Economic Recovery?
This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here
While final U.S. election results are not certified, as of this writing, a different type of event with the potential of a massive impact has become definitive: the U.S. has been hit by a 3rd COVID-19 wave. Many European countries are imposing very restrictive lockdown measures. Mexico and the rest of Latin America are in poor COVID straights. Canada, Australia and New Zealand are in much better shape. Their Federal governments followed steps from science.
It appears natural to ask: How is this going to affect the U.S. economic recovery that just started? Are we going to enter another set of state-led lockdowns that might cause similar damage as the first ones in March? Or could this time be different?
The answers to these questions depend to a certain degree on who the tenants at 1600 Pennsylvania Avenue become. But we want to shed light on some factors that are going to play an important role. Regardless.
First of all, the 3rd wave refers to the recent uptick in the weekly confirmed new COVID-19 cases per day.
With 42 states reporting increasing numbers, the daily average of reported new COVID-19 cases is exceeding 86,000 cases per day during the first week of November 2020.
A combination of factors could exacerbate the effects. First, lockdown measures are more relaxed. Second, the weather is getting colder. So more and more social gatherings are taking place indoors. While the first wave appeared to concentrate on the Northeast and the second wave on the south, the third one appears to be predominantly focused on the Midwest.
Nevertheless, it stands to reason — we might see a reinstatement of certain state lockdown measures across the country. And spillovers across state lines are very likely. The political will to impose tighter lockdown restrictions will be closely connected to the vacancies (or lack thereof) in hospitals. As lockdown restrictions will be considered the measure of last resort.
With the U.S. economy just pulling off a record comeback, after the initial March-April-May decline, one might think. Another lockdown would wreak havoc on the U.S. economy. Just like it did in the 2nd quarter. But that might not necessarily be the case.
Consumers have adapted a lot over the last few months. They have shifted their spending habits away from traditional in-person venues to the online alternatives, using contactless delivery or curbside pickup. As a result of this, a fresh form of lockdown (which largely would target social gathering venues, like restaurants and bars) might be limited in its economic effects. For that reason.
Another potential avenue that we might go down? A stricter enforcement of safety guidelines (e.g. wearing masks, maintaining and proper distance, etc.) That could help prevent another lockdown and allow for a more targeted policy. That would allow our governments to get rising COVID-19 cases under control, without having to threaten regional economic recoveries.
Finally, if the election outcome is a win for the Democratic Presidential candidate, with Democratic control of the House, but Republican control of the Senate? We still expect a higher chance for large-scale fiscal stimulus. Senate Majority Leader McConnell stated a package can be done, even before January 2021. That is paramount in our view. To prevent lasting damage from any continued subdued economic activity caused by the virus.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>