‘When This Is All Over’

Anthony Fauci had a simple message for those protesting and otherwise lashing out at containment protocols aimed at curtailing the spread of COVID-19 in America.

“Unless we get the virus under control, the real recovery economically is not gonna happen”, Fauci told ABC. “So what you do if you jump the gun and go into a situation where you have a big spike, you’re going to set yourself back”.

And that would be a shame. Because the US is finally on the right side of the curve. The situation in New York is steadily improving. “Only” 478 New Yorkers died over the last 24 hours, the least since April 2, Andrew Cuomo said Monday. It was the sixth straight day that the death toll has fallen. The three-day average of hospitalizations was also lower for a sixth day. All in all, Cuomo said the data seems to show the state’s epidemic is on the descent.

Abroad, the news was similarly positive – or at least in the west. Italy had the least new infections since March 10 at 2,256 versus 3,047 the previous day. Daily fatalities from the virus in the UK were the lowest in two weeks. In Germany, where some shops have been allowed to reopen, new infections totaled 2,018 over the past 24 hours, the least this month. The number of daily deaths was the lowest since April 1.

It can scarcely be emphasized enough that the worst possible outcome for the economy and markets would be a premature reopening stateside. But Donald Trump has been keen to encourage protesters and foment civil disobedience in states where some locals are restless. Much of the vitriol emanating from those protests is aimed at Fauci. Note that none of that is a partisan assessment. The president has made no secret of his support for the protests and arguably sparked them himself last week with tweets calling on citizens in several states to “liberate” themselves.

Read more: Liberation

It’s a bizarre state of affairs when the head of the government is explicitly endorsing some citizens’ flouting of public health guidelines in the middle of an epidemic, but that’s where we are.

The dynamic wherein markets respond favorably to news that the economy is on the verge of being tentatively brought back to life is likely to goad the president into pushing it along, even as health officials and some governors express trepidation.

This makes for a perilous setup, wherein both down days for US equities and up days are cause for Trump to hurry things. Because positive sessions are associated with optimism around a grand reopening and negative sessions are, in general, associated with some manifestation of the lockdown (on Monday it was oil prices), scarcely a weekday will go by when the White House doesn’t find, in the market, an excuse to push for a relaxation of the measures which have flattened the virus curve.

Trump will doubtlessly lament crude’s historic plunge into negative territory given the lengths he went to in order to help secure the production curbs agreed earlier this month. The sooner people are back on the road and back in the air, the quicker oil demand can begin to recover.

After the bell on Monday, IBM withdrew its full-year forecast, citing COVID-19. The company said it will reassess the situation based on the extent of the macroeconomic recovery at end of the second quarter. It’s a sign of the times. “Our recurring revenue stream, continued gross profit margin expansion and strong balance sheet and liquidity position remain stabilizing elements in an unprecedented business climate”, CFO James Kavanaugh remarked. “We’ve taken actions within our business to provide the necessary flexibility and operating efficiency for the current environment”.

Goldman on Friday slashed its outlook for cash usage for corporate America in 2020. S&P 500 companies’ cash spending will plunge by a third this year, the bank said, projecting a 27% slide in capex. “Capital expenditures fell by 23% from peak to trough during the Global Financial Crisis and 33% after the collapse of the Tech Bubble”, David Kostin notes, providing a bit of context for the projected cliff-dive.

Those kind of projections, if borne out, will negate (and then some) the effects of the windfall Trump delivered to corporate America via the tax cuts.

It’s the kind of forecast which might compel a leader of the compulsive sort to throw caution to the wind in a public health emergency as part of a bid to salvage the year.

The problem with the protests the president is throwing his support behind isn’t that some Americans have channeled their inner Michael Burry and come to the conclusion that COVID-19 analysis suffers from chronic “denominator deflation” and that, based on a rational assessment of the numbers, the cure (i.e., total economic lockdown) has indeed become worse than the disease.

Rather, the problem with the protests is that, by almost all appearances, they are motivated by a combination of cabin fever and lowbrow libertarianism which finds expression in poster board signs and banners made out of bedsheets featuring slogans that echo the kind of bumpersticker jingoism you’d find in the apparel section at a truck stop.

Sparse though they were, the protests can gather momentum with the presidential blessing, in turn leading to even louder calls for the lockdown to be lifted sooner rather than later.

As Trump would put it, “We’ll see what happens”, but the conditions seem ripe for the collective loss of sanity, which could lead to poor decision making in the name of economic expediency.

“I believe the worst is over if we continue to be smart”, Andrew Cuomo said Monday. “Smart” is the key word there.

“We are going through hell”, the governor later tweeted. “When this is all over, I want people to say, we went through hell but we learned lessons and we built a better society because of it”.

Maybe we’ll be able to say the same thing for markets.

And yet, somehow, I doubt it. Or at least not as it relates to the “learning of lessons” bit.