On Monday, the Dow Jones took another 600-point dive early before paring off by noon. As COVID-19 cases in the US topped 562,000, the markets have remained unstable. The US essentially suspended huge sectors of the economy to keep the spread of the virus in check. While this has been a boon for public health, investors are concerned as the Dow Jones continues to show the scars of the drastic measures.
The economic shutdown has led to tensions between economic experts and health experts over how long to keep the measures up. While common finance advice would have the economy reopen as soon as cases begin to drop off, medical experts caution against that. They warn that reopening the economy too rapidly could result in another outbreak of infections.
According to recent modelling, the US’s aggressive embrace of social distancing guidelines has likely resulted in numerous lives being saved. Death predictions are now falling far under initial estimates, showing that the US has done a good job of curtailing the spread of the virus.
While this has had a marked impact on the economy, things are recovering amidst optimism over these updated numbers. The portions of the economy that are still open, like grocery stores and some online shopping, have remained strong throughout the pandemic. Moves from the Federal Reserve have also helped keep the economy afloat in these uncertain times.
Another aspect of the federal government’s response that has alleviated investor fears has been the COVID-19 relief bill. The bill, which offers huge loans to small businesses and a massive bailout package for industries like airlines, is unprecedented. It’s provisions to give $1,200 to eligible taxpayers have also played a role in investor optimism.
This cautious optimism has been upset by dips and dives like Monday’s 600-point plunge. Some healthcare experts have floated idea like rolling rounds of social distancing to last months at a time, until such a time that a vaccine is developed. That could take as long as 18 months under even optimistic estimates.
Such a move would likely be catastrophic for the economy, essentially strangling small businesses and leaving only the largest companies afloat. Thankfully, updated models show the need for such dramatic measures is likely lower than initially thought. At present, the lack of hard-and-fast knowledge on the virus is the biggest issue in predicting future market moves.