Austria has announced that small shops will open from the 14th of April. Wuhan is also opening after a 76-day lock down. Most European countries, except for France and UK have seen almost flattening of the infection curve. New case growth in the US has slowed down to 8.3%.
The positive reaction of the market shows that the financial system is responsive and inherently optimistic. The pace of recovery in the markets indicates that the centrals banks have been successful at saving the financial system. In fact, in the developed world the fear has shifted a bit from the financial stability to what the long-term fiscal impact of these bailouts would be. This is a good sign.
However, I fear that the market will remain volatile until a vaccine is widely available. I have spoken to many medical experts in the US and the UK and key point they say is that we still do not have enough information to make predictions about the virus. We know the influenza virus for over 150 years, it still leads to thousands of deaths every year. We only know this virus for a few months.
The medical sector and governments do not yet have enough information to make effective decisions. All our notions such as the virus primary impacts people over 60 are all based on very limited cases. For example in the US, a high proportion of the hospitalized cases are of young people. Over the last 24 hours, there have been 730 deaths in the UK, which includes 29 people who were young and healthy. My friend, a medtech professor at MIT said that unlike influenza in this virus, in many cases patients do not have full recovery. Their lung capacity reduces and in some cases, there is also damage to the brain leading to memory loss or balance issues.
It might be dangerous to trust imperfect data. Singapore for example is now enforcing a stricter lockdown since they found out that the tests they were using were not good enough to record mild cases – which they have not been able to quarantine. So while the markets are certainly responding to any positive news – which is a good sign, we think the best approach is to remain humble and accept that we know very little.
We pray for the good health of you and your families.
