Arizona, New Jersey, Others Return To Partial Lockdown Mode

New Jersey is closing down in-restaurant dining. California is closing some beaches on fourth of July weekend, meaning if you have to get their by car, you’re not going. And Arizona, one of a handful of Sunbelt states seeing their first wave of the coronavirus start to crest, is now in partial lockdown mode.

At a press conference on Monday, Arizona Governor Doug Ducey announced Executive Order 2020-43: Pausing of Arizona’s Reopening — Slowing the Spread of Covid-19, which includes closing bars, indoor gyms, fitness clubs, indoor movie theaters, and waterparks effective immediately. The state won’t consider reopening those places until July 27.

The Executive Order also limits mass gatherings of any kind, though it was not specific about gatherings such as protests, which are a first amendment right.

The stock market seems to be taking this all in stride. The S&P 500 was up nearly 1% in the first couple of hours of trading. But riskier assets, like emerging markets, were down 0.25% as measured by the MSCI Emerging Markets Index.

What are investors thinking about these lockdowns?

Remember, Wall Street was on the rise over the last several weeks because investors were seeing an end to lockdowns. Now they are seeing them come back, and not just in the U.S., but in parts of Germany and in Australia.

New Jersey was doing good. It was part of the Tri-State epicenter that saw the first major outbreak of the new SARS coronavirus in the U.S. back in March.

It remained in lockdown mode longer than most states, but was starting to battle back to normalcy. New Jersey’s OpenTable bookings jumped from -99% year-over-year to -51% in only two weeks. That’s going to reverse again as the governor, Phil Murphy, told restaurant managers that they can only serve food outside.

Texas began opening a month and a half earlier, but has lost much of its gains due to its own outbreak.

“As of now, our model estimates that around 40% of economic activity that was lost due to social distancing has so far been regained,” writes investment officers from Glenmede led by Jason Pride in a note to clients. That is now about to be rolled back slightly. And moreso if this keeps up.

Glenmede expects that, despite the return of partial lockdowns, the U.S. will still witness a U-shaped economic recovery.

A slew of data in the U.S. has shown signs of improvement above what many economists had predicted thus far. But if the initial recovery was a V, the return to partial lockdowns and travel bans will stretch that out to a U.

Dr. Doom, Noriel Roubini, is now predicting a “Great Depression.” Call that an L.

The overarching purpose of social distancing has been to flatten the Covid-19 infection curve so as not to place too much strain on hospitals. As signs of a rising number of coronvirus cases are reported in a handful of states, what matters most are hospitalization trends there.

On the national level, hospitalizations have declined meaningfully from around 60,000 in April to around 30,000 today.

Regional trends differ. The Northeast is seeing improvements, but the South is now facing its own outbreak, proving that you can run from the coronavirus, but you cannot hide.

The Center for Disease Control reports that the percentage of intensive care unit (ICU) beds occupied in New York and New Jersey are at 54% and 42%, respectively.

Arizona, North Carolina and Rhode Island, which altogether contribute around 5% to U.S. GDP, have more than 75% of their ICU beds filled and are at higher risk of renewed shut-ins to avoid a shortage in healthcare capacity.

All told, some 15 states are pausing or delaying reopening phases right now amid a surge of new coronavirus cases. The United States is now approaching 2.6 million cases, the most in the world, thanks in large part to testing. Most people are not severely ill and recover at home.

Health and Human Services Secretary Alex Azar told Maria Bartiromo on her show “Mornings with Maria” on the FOX Business Network on Tuesday that he hopes to have a vaccine ready as early as the fall.

“We are hoping to have hundreds of millions of doses of a safe, effective vaccine, or multiple of them, by early next year with tens of millions of doses by the fall of this year,” he told Bartiromo.

He also cited the use of some therapeutics, including Remdesevir, an expensive drug made by Gilead Sciences

GILD
. Their stock is up 1.94% in Tuesday trading.

Azar said most of the new coronavirus cases are being found in people under the age of 35 who were in crowded bars and nightclubs.

With lockdowns staging a mini-comeback and Dr. Doom spreading his gloom, Wall Street begs to differ, at least for the time being.

The stock market rally over the last two days has a lot to do with the current quarter-end portfolio re-balancing. It takes place at the end of every quarter, and tends to support the stock market rally.

But overall, if the coronavirus leads to more lockdowns, and for longer; and if hospitals witness a surge, moods will change from Wall Street to Main Street. We are not out of these dark and awful woods just yet.

For investors, no need to panic?

“Once the situation is under control in the U.S., and the country is moving in the right direction once again by taking the accurate measures, it’s likely that the strong tailwinds of the current quarter may push the coronavirus stock market rally even higher in July,” says AvaTrade chief market strategist Naeem Aslam.

Source: https://www.forbes.com/sites/kenrapoza/2020/06/30/arizona-new-jersey-others-return-to-partial-lockdown-mode/