The World In A Week 58 – Balancing Act

The focus last week was mainly on the US, which is arguably seen as the new epicentre for the pandemic and, perhaps, the road map for the next phase in this battle.

US equities recorded their first weekly drop in April, illustrating a volatile week that saw indices buffeted by record unemployment claims, disappointing drug trials and an oil price that went negative.  The week did end strongly though, as sentiment was lifted by the authorising of the fourth US economic relief package since the pandemic began.

President Trump signed off the $484 billion stimulus package into law, which aims to provide additional relief to small businesses, as well as hospitals, with the aim of increasing coronavirus testing.  Never one to miss an opportunity to tweet, Trump also promoted the theory of pent-up demand on his Twitter feed; people in lockdown are generally spending less, meaning enforced savings, and it is those savings that could support a bounce back when the lockdown is lifted, as long as fear is contained.

Trump has also signalled support for ‘reopening’ in his Twitter feed, coinciding with the US state of Georgia, which has rolled back some of the lockdown measures, allowing small businesses such as hairdressers, spas and tattoo parlours to reopen.  It also emphasises the dilemma of how social distancing will work at this interim stage, as all of the above businesses involve close contact.

The dichotomy of wanting to supply a service, to keep your business solvent, but at the same time wanting to keep your family safe through social distancing, is another challenge for people and governments to find a solution to and whilst tackling the fear of risk.  If reopening is enacted too early, or people believe it is too early, fear of the virus could do more economic damage.

The next stage is a difficult balancing act of keeping the population safe, whilst managing people’s expectations for when the lockdown measures could be relaxed.  Governments will want to restart their economies as soon as possible but acting too early could be worse than acting too late.