The US has been effectively shut-down almost overnight as a result of the Coronavirus. Jobless claims have soared by weekly figures never before seen in the history of our country. Indeed, the US response to slow the spread of the virus has been blunt and far-reaching. With an estimated 95% of the American population largely confined under some form of stay-at-home order, many are wondering what the path ahead holds as the U.S. looks to re-open. Let’s take a look at how mitigation tactics have worked so far, and examine the promise and pitfalls of potential paths forward.
The Results So Far
First things first – have the stay-at-home orders and social distancing worked? The evidence seems to suggest that they have indeed worked to slow the spread of the virus as intended. In the early days of the Coronavirus spreading in the US, some health expert’s models suggested that the death toll could easily reach one to two million people if the US did nothing to hold it at bay, with nearly 100 million or more people getting infected. While no deaths are to be taken lightly, the US has seen only a small fraction of this initial estimate – approximately 20,000 deaths to-date resulting from 550,000 infections – and the growth rate of infections seems to be rolling over. As recently as a week ago Trump’s Coronavirus task force was still estimating 100-200,000 total potential deaths; even this has now has been revised further downward to approximately 60,000.
A Potential Path Forward
So, now that we seem to have worked to substantially slow the spread of the virus, what comes next? Clearly, if a vaccine was available, the country should be able to effectively re-open in full. But we’re not there yet. And with each additional day of effective shutdown, many US businesses and consumers may continue to suffer. Is there a middle ground?
One of the most widely discussed blueprints for finding a middle-ground involves a 3-Phase approach, substantially as follows:
[Phase 1] Slow the virus’ spread through stay-at-home orders;
[Phase 2] Reopen the country piecemeal by state/region, under certain conditions (I’ll discuss further in a minute); and
[Phase 3] Reopen the entire country when a vaccine is available.
This approach was perhaps most credibly presented in a proposal penned by Dr. Scott Gottlieb, a physician and business-friendly health policy expert who was tapped by Trump in 2017 to serve as his FDA commissioner. Dr. Gottlieb has Trump’s ear on policy to an extent, and Trump has indicated he has reviewed Dr. Gottlieb’s proposal. Trump has expressed a clear interest in re-opening the country as soon as possible. Whether this is viable or not remains to be seen.
Of course, we are already in Phase 1 of the above 3-Phase blueprint. In Phase 2, Dr. Gottlieb suggests that states/regions can re-open if the following conditions exist:
• A sustained reduction in cases for at least 14 days;
• Hospitals in the region are safely able to treat all patients requiring hospitalization without resorting to crisis standards of care;
• The region is able to test all people with COVID-19 symptoms; and
• The region is able to conduct active monitoring of confirmed cases and their contacts.
Subsequent to this, a country-wide re-opening is possible in Phase 3 as soon as a vaccine becomes available. With an effective a “soft-open” prior to having a vaccine, this approach certainly may seem to have some appeal. However, questions remain as to its viability.
For one, the resources and man-power effort required in Phase 2 to identify all people with symptoms, and effectively trace the movement/interaction of any known carrier, would be tremendous. Countries like China have done this to some extent, but the government there exerts substantially more control over its people than in the US. However, this is not to say it can’t be done; tech giants Apple and Google have opt-in tracking solutions in the works that could provide substantial assistance here.
Second, it would remain to be seen who would actually be willing to go back out “into the wild” in Phase 2. As anti-body testing becomes available, those who are already immune could re-enter society, as perhaps could those who have little risk and are not known to be infected. However, given that this virus has shown to be transmittable while carriers are asymptomatic, those at high risk and possibly others would choose to remain isolated. Given that some portion of the population would potentially remain isolated, businesses would be faced with the task of evaluating re-opening, re-staffing, etc in the face of uncertain demand. This could be problematic.
Moreover, the virus may prove to spread more than anticipated once a “soft-open” happens, and result in another round of stay-at-home orders. This would cause further disruption to consumers and business. We’ve already seen this re-lockdown happen in places like Singapore and Taiwan, where the countries initially re-opened as the virus seemed under control, only to see themselves reverse course.
Thus, this blueprint of a “soft-open” 3-Phase approach seems an uncertain path at best. It’s tough to know just how problematic the risks posed above present in this scenario, however, which may warrant a cautious attempt at this approach.
I understand I haven’t painted a perfectly rosy picture with respect to getting back to normal anytime soon. This is not to say that there can’t be upside surprises. Phase 2 could be attempted with widespread success, particularly as Americans crave a return to normalcy. Several therapeutics are set to report on clinical trials imminently (e.g. Remdesivir), which could be readily available for widespread use. Other treatments are already being implemented with some degree of success (e.g., Hydroxychloroquine). Meanwhile the world is working feverishly to produce a vaccine. At some point in the not-too-distant future this pandemic should definitively be stomped out. From an investment perspective, however, the Government’s colossal support measures may well have provided a floor under equities, enabling investors to look past some near-term pain and possibly see further upside.