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The US Wants to Reopen?!

01052020_USA COVID-19

The US Wants to Reopen?!

States around the US have begun putting their hands up to be some of the first to trial reopening their economies. Nationally, the US leads the world in infections and deaths due to COVID-19, and by some margin. While most major economies are through the worst of (the first wave of) the virus, the US is yet to reach peak infectious population.

Public health experts have repeatedly warned that reopening too early could cause a second wave of the virus, evidenced in countries such as Singapore, Denmark and Germany. Nonetheless, beginning with Georgia on April 24, several states have opted to test their economies and begun relaxing some of their stay-at-home rules.

Reopening is of course a polarising decision – how can you weigh the value of potential lives lost against the economic cost of staying shut? 30 million Americans have filed initial unemployment claims in the past six weeks and many of the government’s $1200 weekly stimulus cheques promised to the newly jobless are ‘stuck in the mail’, likewise are the federal relief funds for small businesses. Meanwhile, the US economy shrank 4.8 per cent in the March quarter, ending a decade of consistent economic growth. Economists have projected at least a 30 per cent annual decline in Q2, which Fed Chairman Jerome Powell declared will be “worse than any data we have seen for the economy.” But what is a human life worth? Leaders and business owners face an impossible struggle between lives and livelihoods.

A real challenge for the US comes in the fundamentals of their system. Decisions to reopen local economies occur at a state and county level, yet the virus spreads on a national scale. 464 million domestic business trips were taken in 2019, and while this has been minimised, it is far from zero when stay-at-home orders are eased. America is vastly interconnected and governors have rejected the idea of locking state borders, a temporary measure employed across Australia. As such, one locality’s decision to risk a second wave can compromise the whole country’s effort to supress the virus.

Countries who were hit earlier by COVID-19 have begun loosening restrictive measures. Rebounds in case rates have occurred as expected following relaxation. Singapore meticulously traced the contacts of each infection, appearing to control contagion while maintaining some semblance of normal life. Suddenly their caseload more than doubled in a few days and stricter lockdown measures were required from April 8.

Some European nations have more recently tested the waters. Danish schools, salons and tattoo parlours have been open for two weeks; their coronavirus reproduction rate has risen significantly from a descending 0.6 on April 14 to 0.9 last week. Germany has moved faster than its neighbours, allowing most shops, museums, exhibitions, zoos and some classes to reopen.

Europe has the luxury of testing reopening on a nation-by-nation basis while borders remain locked. The US likely requires a coordinated national response to truly contain the virus. Though they may appear to be foolishly risking a second wave of cases, for everyone’s sake I hope they can surprise us by reopening safely and reducing infections at the same time.

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Lachlan is a Research Analyst at MGIM. Lachlan joined MGIM in July 2018 after studying at the University of California, Berkeley where he holds a Bachelor of Arts (Applied Mathematics and Computer Science).

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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