The coronavirus first appeared in the Hubei province in China in late 2019. In January, it was widespread in China and arrived in neighboring countries like Japan and South Korea. Two months later it also became widespread in Europe, effectively paralyzing the continent for two months as governments rushed to impose lockdowns and keep the sick in quarantine. Spain and Italy both were heavily affected, with a much higher lethality rate than the outbreak in China.
The disease reached the United States at around the same time and made the North American country the most heavily affected region, with over 1.4 million cases, or roughly one third of the infections globally. The coronavirus is currently spreading in Russia and Mexico for the first time, indicating that the first wave of the pandemic is not over yet.
Still, the markets are already feeling the pressure of fears that a second wave is coming for the countries that have presumably dealt with the coronavirus already. But is there any real ground to those claims?
The main reason why the coronavirus is so dangerous is its fast pace of spreading and its survivability. While the World Health Organization does not believe the virus can survive outside of a living carrier (i.e. on surfaces outside, such as benches, chairs, door handles, etc.) for longer than 24 hours, it can be dormant in people for over 20 days, not the 14 initially reported. Thus, many people affected with it might be asymptomatic and test negative for Covid-19 but still carry the virus and infect others. This is why social distancing and staying at home have so far been the most effective ways to limit the spread of the disease.
But with the high economic cost of those measures, many countries are eager to return back to normal and restart their economies. We have already seen awful fundamentals for the first quarter of 2020 that show low inflation, high unemployment, and negative economic growth. The pressure to avoid a long-term economic recession has pushed governments in countries that are past the peak of the outbreak to open up businesses and public venues and to allow everyone to get back to work.
However, the countries that have done this, such as China, Germany, South Korea, and Spain are already beginning to see new cases. And with people still being infected, it is likely that they have infected others, who have spread the virus to someone else, etc. Due to the lack of a vaccine against the coronavirus, unless the number of active cases drops to zero, we are going to see more Covid-19 outbreaks. Based on WHO estimates, we might not see a vaccine until early to mid-2021 at least. Plus, many countries are still struggling with a shortage of health supplies such as test kits and protective masks and gear.
So, yes, the short answer is, a second wave of the pandemic is quite possible. This could mean further lockdowns and more blows to the global economy, which is already setting up for a recession. Thus, investors’ fears and apprehension are well-justified. Traders need to prepare for more declines in stock indices and look towards safe haven assets for profit.
