Cases of novel coronavirusare on the rise – in a big way. Is this the “second wave” that so many health experts had feared? Or is it “merely” the revitalized trajectory of a first wave that was nevereradicated?
It doesn’t matter. Any new way of looking at the highly worrisome surge in cases is nothing more than a distinction without a difference. All that matters is this: The pandemic is not only NOT under control, it’s getting worse. And literally getting worseby the day.
This past Saturday, the nation recorded 126,000 new cases of the virus and more than 1,000 deaths. It was the fourth day in a row the U.S. bested the dubious milestone of 100,000 daily cases. Moreover, nearly every day in the past week has seen a new actual record in daily cases. The total number of COVID-19 cases in the U.S. recently surpassed 10 million. There have been more than 242,000 deaths since the outbreak began.
The pandemic always has had two crises associated with it. The first and most obvious one is the public health crisis. The second crisis is the resulting economic calamity. It has been clear all along that the two crises are inextricably entwined. Without a firm health resolution to the pandemic, there’s no resolution to the associated fallout for the economy. And with the outbreak suddenly worsening in the U.S., there are concerns now that the robust economic recovery on which the nation seemed to have embarked might just as suddenly be over.
The implications are frightening. The possibility of a rapidly worsening crisis in turn suggests the possibility that mass lockdowns and other significant constraints on social behavior could return. If they do, it seems unlikely that skyrocketing unemployment and other significant economic consequences won’t also make a comeback. And if THAT happens, it would all but assure the continuation of an enormous fiscal commitment by Washington as well as the “whatever it takes” hyper-accommodative monetary policy posture of the Federal Reserve.
The doubling-down on those initiatives could be terrible news for the dollar. But given how precious metals reacted to these efforts when the pandemic first blew up, this ongoing resurgence in cases could be the spark that helps gold and silver break out of their months-long sideways trading pattern and restart their journey higher.
Moody’s Economist: Second Wave of Virus Could Lead to Depression
America’s economy exploded by 33% in the third quarter as recovery from what was thought to be the worst of the pandemic kicked off in earnest. This jump in economic output followed a second quarter that saw unemployment rise to its highest level since the Great Depression and gross domestic product (GDP) sink by 32%.
The powerful start to the hoped-for economic recovery from the pandemic could be in serious jeopardy, however. In light of the astonishing increase in virus infections across the country recently, there are growing concerns the economy could end up right back where it was seven months ago, when the International Monetary Fund (IMF) noted that advanced, emerging market and developing economies all were in recession for the first time since the Great Depression. Mark Zandi, chief economist at Moody’s Analytics, recently told CNBC that he thinks “the risks are pretty high here that the economy backtracks.”
Notably, the IMF said just last month that the U.S. economy is projected to slump by 4.3% this year, an improvement over a previous and much grimmer forecast. The IMF earlier had forecast a massive drop of 8%.
But the IMF’s more optimistic outlook obviously predated the startling rise in domestic coronavirus cases we’re seeing play out in real time. In light of the worsening conditions, economist Zandi says the economy is “pretty vulnerable” right now.
For some time, Zandi has been less than fully confident that the worst of the pandemicand its economic effects are behind us. Moreover, hehas stated previously that if we see a second wave of the virus – something many are saying is unfolding right now – the country would be facing a depression. “We may not shut down again,” Zandi told CNBC in another conversation back in May, “but certainly it will scare people and spook people and weigh on the economy.”
The inference we are to take from Zandi’s assessment is that another mass lockdown wouldn’t be required to cultivate a depression. All it would take is a second wave that undermines any remaining confidence consumers might have in the economy – a second wave such as the one that appears to be developing right now before our eyes.
Precious Metals Could Thrive in Worsening COVID-19 Environment
As I noted earlier, whether the current surge in virus cases represents a second wave or a renewal of the first wave is immaterial. What matters is this: The virus still represents a profound threat to the well-being of our fellow citizens as well as the economy. There now is promising talk that a vaccine soon may be in our midst. Its actual arrival still could be many months away, however. Also, the ultimate effectiveness of any vaccine remains to be seen. Adding to that lack of clarity is the fact we don’t know how many people will take it. An August Gallup poll found that 1 in 3 Americans would not get a COVID-19 vaccine. A USA Today poll taken in September found that two-thirds of Americans would not take a vaccine right away, while roughly one-quarter of the respondents said they would never take it.
So we can’t be sure to what degree a vaccine will help to meaningfully mitigate the ongoing economic damage wrought by COVID-19. For the time being, we have to process information and respond to the current environment as it exists. Accordingly, your first priority is to stay healthy, taking whatever measures you deem appropriate to make that happen. Your second priority is to do what you can to help preserve your financial security in these most unsettled and unpredictable times.
To that end, it’s worth noting that some of the best-known alternative assets – physical precious metals – demonstrated impressive strength during the same second quarter that proved so devastating to the broad economy. From April through June, gold climbed 13% and silver jumped 32%. And if you extend that time period through the end of July, the numbers are even more impressive: Gold increased nearly 25% and silver was up just over 70%.
Whether physical precious metals play a role in your portfolio is a decision only you can make. But it’s worth noting the solid performance of gold and silver during a recent period characterized by not only significant economic upheaval but also the metals-favorable monetary and fiscal policies specifically engineered to calm that same upheaval. As another wave of the virus threatens to reenergize the same unfortunate health and economic conditions that characterized the country in the second quarter, retirement savers might do well to consider the range of measures available to help stabilize their portfolios.