Expect investors to fixate more on pandemic-related data than economic reports in coming weeks — and the emerging picture is not looking good, JPMorgan Chases’s chief global strategist, David Kelly, cautioned clients Monday.
“Evidence is mounting that a second wave is indeed upon us, even before the first one has ebbed,” Kelly wrote of theof the coronavirus in the U.S.
Data dispels the notion that rising COVID-19 infections in the U.S. are largely due to increased testing, the economist said. He cited numbers showing confirmed infections jumped by 70% from early-to-late June, while testing rose just 21% during the same period.
The latest surge in COVID-19 infection rates illustrates the nation’s inability to get a handle on the spread of the coronavirus, a failure that will continue to play havoc with people’s lives and livelihoods, Kelly warned.
He faulted the country’s political divide: “Sadly, the simple but effective steps of social distancing and mask-wearing have become political issues, with millions of Americans refusing to adopt these basic precautions either as an assertion of their individual freedoms or because they believe the news media is overhyping the pandemic,” Kelly wrote, using the term “sadly” three times in his client note.
The discord that has Americans divided on whether to heed medical experts and scientists leaves little room for hopes of a turnaround until a vaccine is developed and widely distributed, hopefully early next year, Kelly said.
“From an economic perspective, this rolling-wave pandemic likely eliminates hopes for a full V-shaped recovery in advance of a vaccine,” he stated. “The basic problem is that there are many businesses that cannot reopen in a way that is profitable or sustainable, while still assuring consumers and workers that they are not putting their health in jeopardy.”
These businesses include travel, accommodations, food services, personal services, entertainment, sports and retail industries, Kelly said.
Economists at IHS Markit also signaled concern about the dramatic spike in infections and fatalities, withalready having died of complications from COVID-19, the disease caused by the coronavirus.
“The sharp upswing in cases and COVID-19-related deaths raises the odds that a subsequent pullback in spending on the part of consumers and re-imposition of mandatory shutdowns could lead to another contraction in the economy this fall,” economist Chris Varvares of IHS Markit said in a report.