As just another person – sheltering-in-place and concerned about the state of the world – very little about the public health crisis brought upon by the novel coronavirus pandemic can be considered encouraging. However, as a market and economics analyst with a long-term perspective, I have to be appreciative and grateful for the limited reprieves – the silver linings – that the situation has generated.
In our recent overview of the crisis, we tend to consider the problem through three different lenses: the public health crisis, the economy, and the markets. Here are some positive elements on each of these factors.
First, I have to applaud the seriousness with which the public is facing the issue. Nothing about a lockdown is natural or easy, but the collective change in behavior is making a measurable difference in the rates of infection. This action, while difficult, is buying time for healthcare workers to ramp up capacity and increase their knowledge about how best to care for the afflicted.
Second, while the economic data is going to be terrible and, by some measures, will look as bad as the great depression (albeit on a shorter timeline). We have to appreciate the actions of central banks and fiscal policy makers around the globe for acknowledging the severity of the problem and providing liquidity backstops in hard-hit markets and direct fiscal outlays to consumers to offset some of the damage. Nobody expects the economy to bounce back at full throttle once the lockdowns are eased, but a gradual recovery is easier if the secondary effects are not compounded by defaults on an institutional or personal level.
Finally, I am grateful and surprised by the resilience of ordinary investors. We may not have seen the bottom in the equity markets, but even periods of relative calm and partial recoveries give the system time it needs to sort out debt and inventory overhangs and to pullback from a panic. At its recent worst, the markets were only down 33% which is amazing given the economic damage. Investors seem willing to write-off (or, at least ignore) 2020 and focus on the future.
The public health crisis is not going away anytime soon. Testing levels are inadequate for infection tracking and widespread antibody testing has not happened yet. We do not know enough about effective treatments or supportive care. On the plus side, most of us have finally left the comforting state of denial and we at least acknowledge the severity of the issue. This was not a foregone conclusion; it is easier to believe a problem does not exist and, thereby, be forgiven for ignoring it. At least now, we are learning a little bit about our adversary and how to deal with the reality of the situation. That is a decent first step.