Dr. Anthony Fauci testifies during Tuesday’s Senate virtual hearing

The Markets
Yesterday, the Dow Jones Industrial Average closed down 165 points, or 0.7%, at 23,598. The broader S&P 500 Index closed down 8 points, or 0.3%, at 2,861.

The Economy
Democrats in the House of Representatives proposed a new $3 trillion coronavirus rescue bill that includes funding for state governments, another round of stimulus checks for American taxpayers, support for the US Postal Service, and a requirement that passengers wear masks on airplanes and public transit. Republicans rejected the bill before even seeing it.

As we noted in a previous writing, the US economy lost 20.5 million jobs in April, pushing the official unemployment rate up to nearly 15%. Many experts think the true rate is closer to 25%, and likely to go even higher in the coming months, as most Americans remain unsure about returning to work or spending money as the government struggles to contain the pandemic.

The Public Health
As government officials around the world begin to loosen restrictions on activity, some countries that had already reopened their economies are closing them down again after a resurgence in infections. Saudi Arabia, for example, has announced a total lockdown after the end of Ramadan.

On a positive note, the data in the US has actually improved a bit over the past few days. There have been fewer than 200 deaths in New York for two consecutive days, down from more than 1,000 in early April. Nationwide, the number of confirmed new cases each day has started to decline substantially. It’s possible that the official numbers don’t fully reflect the decline, because the number of tests conducted is also increasing. Everything else being equal, more tests should lead to more confirmed cases.

US federal health officials were asked yesterday to testify before the Senate in a virtual hearing. Dr. Anthony Fauci, the country’s leading expert on infectious diseases, said we could likely expect a similar resurgence if states and cities reopen too quickly. In effect, we’re ending the policies that enabled the recent progress.

According to epidemiologists, there have been two successful approaches to stopping the spread of the virus. One is comprehensive social distancing, like the lockdown that has been implemented across most of the country since mid-March. The other is an integrated program of testing, contact tracing and quarantining, which many countries in Asia have adopted.

As we’ve pointed out repeatedly over the past few weeks, despite the increase in testing that has occurred, we’re still testing far too few people to avoid new outbreaks in the future. Senator Mitt Romney acknowledged as much during the virtual Senate hearing yesterday, when he said that America’s record on testing is “nothing to celebrate whatsoever”.

Some states are being very cautious in the reopening. The largest university system in the country, the California State University system, announced the cancellation of almost all in-person classes for the fall semester. And stay-at-home orders for Los Angeles County, the most populous in the country, are likely to be extended for an additional three months.

Springwater’s Correspondence
Beginning May 1 we transitioned to writing to you every other weekday (i.e. Monday, Wednesday and Friday). We’ll continue this through the end of May, and then reevaluate, based on the status of the pandemic and its impact on the economy, the markets and the public health.

We continue to welcome your questions and comments.

Keep the faith, be safe and stay healthy.

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