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Can America Just Turn the Economy Back On?

April 8, 2020 By Jeremy Jones, CFA

By AlexLMX @ Shutterstock.com

The now-ubiquitous Dr. Anthony Fauci told reporters that America’s virus response “isn’t like a light switch on and off.” But that might not be entirely true for the economy. It may be more like a light switch than Fauci’s estimate for the response.

After turning the economy back on, Americans will still have to participate in social distancing, but going from only essential economic activity to even half of former capacity utilization could be a pretty powerful boost.

That said, the longer America drags out its shutdown, the more likely it is a negative feedback loop will form, causing a slow recovery. But it doesn’t have to be that way.

Testing and, more importantly, anti-body testing is still the key. There may be technical or capacity reasons preventing testing and anti-body testing from being made the number one priority, but in the absence of such tests, America is making devastating economic decisions without a complete picture of this virus.

In The Wall Street Journal, Stephanie Armour and Jon Hilsenrath report on the Trump administration’s hope to reopen the economy as soon as possible to alleviate the economic pain Americans are feeling. They write:

Mr. Trump said Saturday that he is considering a second coronavirus task force focused on reopening the country. The administration’s current social distancing guidelines run through April.

“It’s the health people that are going to drive the medical-related decisions,” National Economic Council Director Larry Kudlow said in an interview with Politico webcast on Tuesday. “But I still believe, hopefully and maybe prayerfully, that in the next four to eight weeks we will be able to reopen the economy, and that the power of the virus will be substantially reduced and we will be able to flatten the curve.”

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Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #10 in CNBC's 2019 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
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