Sections

ideals
Business Essentials for Professionals

Investors Say Reopening US Economy Early Could Cause More Harm Than Good To Humans And Markets


03/24/2020


Investors Say Reopening US Economy Early Could Cause More Harm Than Good To Humans And Markets
Despite clear signals that the coronavirus pandemic is spreading across the United States, the desire of the US President Donald Trump to reopen the economy could be bad for the economy, said investors, with the death rate due to the virus going up and Americans still unwilling to go out because of fear of contracting the disease.
 
Many of the states of the country have shut parts of their economies even as the financial markets of the country have been battered by the spread of the virus within the country.
 
At the end of a 15-day shutdown period, which would be around the end of the month, “we will make a decision as to which way we want to go”, said Trump on Monday.
 
Americans were urged to halt most social activities for 15 days by Trump last week. Investors are however wondering the powers that lie with Trump to simply turn on the American economy just by passing an executive order.
 
Axel Merk, chief investment officer of Merk Investments, since investors themselves are anxious of the coronavirus spread and the uncertainties surrounding its trajectory and its impact on the economy, therefore they would not take the idea of Trump reopening the US economy anytime soon well.
 
“Markets will react badly because they have learned that this approach doesn’t work,” Merk said. “From a medical point of view, you have to break the exponential growth and you do that with shelter in place policies.”
 
There was a 3 per cent drop on Monday in the S&P 500 Index. Compared to the peak that it reached on February 19, the index had fallen by about more than 30 per cent and the current levels of the index was only seen at the end of 2016. 
 
In recent days the estimates of the impact of the virus pandemic on the American economy have grown bleaker by the day.
 
St. Louis Federal Reserve President James Bullard said that the economic output in the second quarter could be about half of the typical number while the number of unemployment in the US could hit 30 per cent at the same time.
 
The time to judge whether to reopen the economy has not yet come, said Jennifer Pline, head of wealth management for Cambridge Trust in Boston. “As we’re just starting to close things down fairly tightly, we need to wait a while until we get more traction and less contagion with the virus.”
 
The price to be paid for reopening the economy too early could be huge. If the epidemic was allowed to spread unmitigated, there could be 2.2 million deaths in the United States according to a March 16 study by Imperial College in London, which also predicts that the number of needy patients will exceed the critical care bed capacity in the country as soon as the second week in April.
 
The question of whether it would be best to reopen parts of the economy has baffled him, said Ellis Phifer, market strategist for Raymond James in Memphis, Tenn.
 
“It’s really hard to determine which costs more,” Phifer said while talking about the indecision about whether to reopen the economy sooner or later.
 
(Source:www.reuters.com)