COVID-19 Economic Forward Projections

We are in an uncertain time—perhaps the most uncertain time to occur since the Second World War. It is difficult to determine via anything other than wild guesses what will occur on a broad social level over the course of the ensuing year. It is in this sort of environment where confident, highly specific outlooks should be viewed with a pronounced degree of skepticism. Rather, there is a broad range of possible outcomes that range from fairly likely to nearly impossible.

“This is not the time to act as though there is any certainty. When in a state of uncertainty, the best thing to do is to diversify your economic life in anticipation of the most likely subset of possible outcomes.”

Any rebound in COVID-19 infections will be handled in a timelier manner than in the past, with an increasing arsenal of medical tools to effectively combat the virus. Unfortunately, we can also predict a high likelihood that the infection will eventually rebound, and that new hot spots will emerge. The public response if this occurs will be more timely and effective following several months of COVID-19 saturating public attention.

Our model also assumes that a vaccine will be in productions phases for widespread distribution sometime late winter/early spring of 2021. Given recent indications of progress in the process of developing a coronavirus vaccine, this seems like a reasonable timeline, though as we evaluate the “forward economic trajectory” curve, we are actually looking at several different interrelated curves of differing probabilities: for example, the odds that public response will be more effective following several months of experience with COVID-19 is highly likely, and will sharply drop off towards the tail end of “completely inadequate public response”; the “vaccine timeline” curve will be much more gradual towards the edge of “longer than spring of 2021,” while being much more sharp (i.e. unlikely) as we move it backwards into towards 2020.

Conclusion

So what is our “fat part of the curve?” The most likely forward path of COVID-19 will include continued hyper-media coverage of the virus; every bobble and transient spike will be covered with the standard flair of click-bait titles. With an entire country (and world) at play, there should be never ending fodder for apocalyptic coronavirus coverage.

Summer will not end coronavirus, but all indications are that it will contribute to flattening the curve. This is good news for the immediate future, but the downside is that colder weather in the fall will most likely see a resurgence in COVID-19. This has a real possibility of stretching “track and trace” methods of containment to their breaking point: in some locations this may well result in localized containment strategies (i.e. quarantine). Still, with quick testing capabilities having caught up to demand, and the opportunity to staff up for “track and trace” operations, it seems reasonable to think that we will largely be able to ensure that medical services are not overwhelmed.

All of this means that a sharp economic recovery into the summer months is quite possible, though short-term the recovery will be blunted by the overhang of an inevitable October resurgence. The final economic recovery will likely mirror other recessionary recoveries in slope, and should follow the availability of an effective vaccine. 

Feel free to contact me directly if you have any questions, and follow me on Twitter for up-to-date information on market conditions.

-Stan

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