Beware of the second wave, it is already beginning!

UK retail is opening up and more people are going back to work, but when I look at the hard data across the world, I see worrying signs of a second wave of Covid.

Article updated: 17 June 2020 3:00pm Author: Michael Baxter

Will the economy see rapid recovery? Or will it be a slow drawn out affair? If it is the former, then stock markets are about right. If it is the latter, expect more sharp falls.

As for demonstrations around the world, I am still trying to figure out the precise connection with the Covid crisis. I would say that if you think that social discontent is bad now, imagine how much worse it will get if we see a second lockdown and the economic recovery is slow.

Looking at things solely from an economic and investment point of view, It’s the recent hard data on Covid-19 that bothers me.

A look around the world

In the US, the number of new infections in New York is falling rapidly — there were 661 new infections reported yesterday, whereas between the end of March and the middle of April there wasn’t a single occasion when daily new infections were less than 5,000.

But when you start looking at the rest of the US, things start to look more alarming. Yesterday (and remember, reported cases tend to be lower at weekends) there were inexcess of 1,000 daily infections in California, Texas, Florida, North Carolina, Arizona, and Alabama.

Last week, California, Texas and Florida all experienced their worse day for new infections since the beginning of the Covid-crisis.

Detailed data on most US states is not yet available, but the data we have so far suggests that the only states that are seeing rapidly falling infection numbers are the ones that had it especially badly in the first place.

In North Carolina, Arizona, Alabama, and South Carolina total number of infections yesterday, was more than 3% of the total number.

Looking elsewhere, in Iran over the last ten days or so, the average daily infection rate is twice the level from the beginning of May — you may recall, Iran was the first country outside of China and South East Asia to have a serious outbreak of the virus.

It is also taking off rapidly in India (total infections have doubled in the last three weeks and it now has the fourth highest number of total cases in the world) and South America (not just in Brazil, but there is rapid growth in Peru, Chile and Mexico.)

It is wonderful news that infection rates have fallen so sharply across Europe. However this virus has not been defeated yet. If you want to use a war analogy, we have passed the Dunkirk phase, but I am not sure whether we have reached Pearl Harbour yet.

Maybe, the country we should really be focusing on is China. Yesterday saw 57 new reported cases. It hasn’t had any deaths from the virus for several weeks. Assuming the data is accurate, then that is good news. But China is applying tactics in combatting the virus that freedom loving Western governments are reluctant to apply. Frankly, I think they are right to be so reluctant — freedom does come at a price which I think we should be willing to pay.

What are the economic implications?

I think a big hit on the global economy is still to follow as there is still a serious risk of a second wave in Europe, including the UK.

I think the economic recovery is still some way off. Stock markets are still not pricing this in.

How do you tell when markets are close to bottom? Personally, I think the moment to buy is when all around you people have given up hope. But it will be hard to maintain your resolve in such times. Those who can will make a lot of money.

But, as suggested here many times before: the Zoom economy is here to stay. That's good news for online retail, cloud providers, tools that support collaboration over distance, such as Microsoft Teams or Slack, smartphones, AI, cybersecurity, and digital transformation.

For a list of UK techs see Sector spotlight: Tech software and services 


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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