Most of this post was drafted before President Trump’s address to the nation yesterday around 330pm EST, and I have altered the draft accordingly to acknowledge some of the plans that the Trump Administration (and separately, Congress) is considering or has put into place. I will discuss the tone – but not the content in depth - of the presentations by President Trump and Speaker of the House Pelosi later in this article.
The World Health Organisation (“WHO”) reported that 132,000 cases of Coronavirus have been confirmed in 123 countries as of March 13th, and 5,000 people have died from this virus. Here’s the latest on where we stand.
Yesterday morning I listened to a podcast entitled “Confronting the Pandemic” (from “The Daily”) about Coronavirus and how different governments have so far addressed this unexpected pandemic in their countries. The principal person providing commentary was Donald G. McNeil Jr., a science and health reporter for The New York Times. He is a specialist in his field, and he referenced comments from several health organisations during this podcast including most prominently comments from the Director-General of WHO, Dr. Tedros. The WHO tries of course to stay clear of politics and avoids singling out member countries by name, at least those of which it might be critical. However, in their mid-week commentary the WHO praised the response to the Coronavirus by China and South Korea, both countries in which new cases of Coronavirus are starting to decline. For example, around 3,500 new cases per day were being announced in China at the end of January, but by Wednesday (March 11th), only 24 new cases were announced. Here’s a graphic courtesy of the Financial Times illustrating the trajectory of Coronavirus by country – make sure you look at the comments because they provide important colour.
In his press conference, Tedros also alluded to, without “naming or shaming”, countries that the WHO believes have not been sufficiently proactive in acknowledging the severity of this quickly-spreading virus and in providing concrete plans for arresting its spread. Mr. McNeil believes that these countries include both Italy and the U.S., although I would certainly put the U.K. on that list, too.
Before some of you get your feathers ruffled, it is fairly clear of course that – in spite of their proactive approach now - the Chinese government could have likely nipped the outbreak of Coronavirus in the bud when it first surfaced in Wuhan late last year. Instead, the Chinese authorities tried to hide this new virus for several weeks on the basis it could be contained. Also, it is important to remember that the data regarding the number of people that have the Coronavirus is suspect coming from all corners of the world. Some autocratic governments – like China - might not be telling the entire truth, and other countries – like the U.S. (currently) - seem to have inadequate testing kits and simply don’t have a real idea of how widespread the virus is in their countries. So there are plenty of mistakes that have been made up to this point, but this is irrelevant because we are where we are. For the sake of lives and the good of global economy, this thing needs to be contained as soon as possible. The question then is: “are governments being fully transparent and doing all they can to arrest the spread of the Coronavirus in their countries?” I do not really want to focus in this article on “fixing” the global markets, because I have provided my thoughts already earlier this week– see post from Wednesday “Getting Worse by the Minute: What Can Stop the Market Meltdown?” However, one can’t deny that the direction and tone of markets says a lot about people’s confidence about whether or not the Coronavirus pandemic is being adequately addressed. Unfortunately, at the moment, the global markets seem to be screaming loudly that not enough is being done. Also, I don’t want to make this post about political parties or your leanings, so I will try to steer as clear as my conscience will allow me. Rather than regurgitating what we are reading in newspapers and hearing on TV from public officials and politicians, medical specialists, and pundits generally, I want to focus on a couple of things on my “wish list” that I believe need to occur to bring this crisis under control, thereby providing a foundation for an economic recovery in due course.
Firstly, leaders need to exude confidence when speaking publicly by demonstrating that they have their hands firmly around the Coronavirus and are in control of the situation. Furthermore, global leaders need to clearly articulate a credible plan for halting the spread of Coronavirus, and they must also convey that they understand the gravity of this situation and the severity and damage that the Coronavirus will inflict unless it is quickly brought under control. Simply put, concrete steps must be developed and communicated to people to address the virus and end its spread. Slagging it off as a “foreign element” is anything but inspiring and is simply not helpful. Also, politics must be subordinated to the public interest - the welfare of a country’s population has to be the primary concern of the leadership of a country. Clearly, some countries have been dragging their feet and in somewhat of a state of denial about the severity of the Coronavirus. Unfortunately, this will likely result in a very dear price in the form of loss of human lives that might have been avoided. What a shame because it didn’t have to be this way. The second item on my “wish list” is for governments to provide testing kits as well as fiscal support to consumers and small businesses that might need such support in order to bridge what will inevitably be a severe period of disruption. All governments must provide adequate testing for the virus and ensure that those that are infected can be treated and are quarantined quickly. Any and all precautions should be immediately taken without political debate or delay. Governments must provide support to solid companies, especially small and mid-size enterprises (“SME’s”), and companies in troubled sectors like transportation, in the form of direct bridge financing or providing guarantees of bank loans, to assist them so that they do not go out of business during this (hopefully temporary) crisis. Concurrently, governments must provide temporary relief to people that might lose their jobs because of the Coronavirus pandemic, and to those that might have to look after children that might be temporarily furloughed from school, and so on. (Note that I have been silent on monetary policy stimulus mainly because I believe further stimulus in most corners of the world is inadequate and largely impotent.)
As I mentioned at the onset, much of this post was initially drafted with the U.S. and Europe in mind, because the Trump Administration and many of the governments in Europe – especially in Italy – have been slow to respond to this crisis. As you are undoubtedly hearing and reading, Italy has clamped down now considerably, and hopefully it’s drastic measures are yielding results. In the U.S., to give President Trump and Speaker of the House Pelosi (on behalf of Congress) credit, they finally set out plans from the Administration and Congress, respectively, yesterday evening to address the severe nature of Coronavirus in the U.S. It is never too late (even though it was slow coming). President Trump in particular put on a very good show, and his decision to include the CEO’s of several prominent private sector companies alongside him during his address to the nation was an excellent idea. It showed unity and the willingness of the private sector to partner with the government to meet the Coronavirus challenge head on. As far as the companies that participated in the national address, CEOs of several large retailers (Walmart, Walgreen’s, Target, CVS) and pharmaceutical companies (Roche, Quest Diagnostics, Labcorp) were on the podium with the President. These companies offered a variety of services during this crisis, including the use of their parking lots for pop-up testing centres, ensuring their shelves are as full as possible, developing testing kits, and so on. Google will also be working in partnership with the Administration to develop a web-based testing protocol and follow-on instructions, including directing potential Coronavirus carriers to a local testing centre. The President also offered a series of targeted financial incentives. In her speech prior to the President’s, Ms. Pelosi offered a parallel set of stimulus measures to assist consumers and small businesses during the darkest days of this crisis, and these measures were subsequently approved by Congress and signed by the President. This comprehensive approach made sense to me, and it is a relief to see the Administration finally take the threat of Coronavirus seriously.
As validation from the market, I watched the Dow Jones go from +850 points up at the start of President Trump’s speech, only to fall 250 points to around +600 points after a few minutes, before soaring towards the close as President Trump’s speech wore on and he presented his ideas. The Dow Jones closed up over +1,900 points, although I must admit that I am relieved that the market closed before the Q&A, which I thought was mixed at best. This was a lot of ground to cover in a short time and demonstrated that – unlike his rambling speech lacking substance on Wednesday – this one had good ideas.
Coronavirus will be costly for the world both in terms of lives lost and damage to the global economy. Leaders need to show solidarity and conviction to ensure that the population keeps its resolve, and to inspire as much confidence as possible that we will eventually get through this unexpected world calamity. In the meantime, bunker down and let’s all hope for the best.