The explanation of the increase in new cases
In the last 10 days, the headlines of the international media have been flooded with reports about the increase in new cases.
However, a significant omission is the fact that the vertical rise is due to a number of factors, which were predicted and this is one reason why the markets have reacted very calmly.
In any case, we are not talking about a second wave of the pandemic, as the States that are in unfavorable position, had not managed to align their curve.
A significant number of US states have decided to open their economies faster and they are facing a new increase in coronavirus cases, which are accompanied by hospitalization. New deaths are still declining.
On the other hand, there are a number of States, which have a corresponding weight in US GDP, where there is a steady decline in all of the above. Although the end of the pandemic seems far away, the effects on the economy from the latest developments are not expected to be so dramatic.
An in-depth analysis of the data on the course of the pandemic in the United States shows two categories of States. Those who relapsed after the re-opening of the economy and those who had no change in the evolutionary trend of the pandemic and continued to have a weakening of the intensity of the virus. California, Texas, Florida, Arizona and Carolina are facing a vertical outbreak of the pandemic. On the other hand, New York, New Jersey, Illinois, Pennsylvania and Ohio have been extremely successful in managing the pandemic, despite the fact that they were all badly hit at the start of the virus in US.
What will be the impact on the markets?
The evolution of the pandemic in the above States has a great impact on the market, as each of the two “groups” represents 45% of the US GDP. The reason for this diversification is well known: States that took immediate tough action and were slow to open their economies are in a great position, while those that were slow to take action and then quickly eased restrictions found themselves facing an increase of new cases.
Even in the case of States experiencing a sharp rise in new cases, the number of new deaths is declining. This probably means that medical treatment has made progress and that the new cases are mostly young people. This shows that the health system can fully deal with the virus, but also that the case of growth derailment is very small. After all, with the first signs of a decrease in new cases for the States above, the markets will proceed to a new rise.