This time is different — but some things never change
We’ve never seen a situation like coronavirus, though we compare it to other historical events like the Spanish Flu and The Great Depression.
There are days when I think to myself, “This will pass.” And there are days when I think, “This is so different — we are shut down.” We all want the answers now. Not knowing exactly when COVID-19 will peak, exactly how long we will stay shut down and how far the markets will fall is unsettling. It’s the fear of the unknown, which is one of the first fears and why so many of us fear death.
Economist Kenneth Rogoff says this COVID-19 war will be won or lost on the health front.
In a March 30 article in The Wall Street Journal, Walter Russell Mead wrote that “comebacks are America’s specialty.” We’ve done far more to fight the pandemic and its consequences than other countries. He says, “The American response to date, flawed as it is, suggests that the strengths that brought the U.S. through even the worst crises in the past have not yet faded away.”
We are a comeback country. This time is different — but our strengths as innovators, our world-class health care system and individuals’ efforts to contain the spread of the virus will contribute toward the comeback. We are incredibly fortunate to have Ohio Gov. Mike DeWine, who was ranked No. 1 by Politico, which stated, “Perhaps there is no single governor who has done more to put the nation on a war footing in the fight against coronavirus than DeWine, whose actions have contributed to Ohio’s relatively modest number of cases, with a per capita infection rate currently ranked 27th out of 50 states.”
We are grateful for the leadership of DeWine and Sen. Rob Portman, along with a team of public officials focused on managing this crisis. By managing the health care crisis and focusing on caring for the people through vehicles like the stimulus, our economy will eventually gain strength, as well.
The problem is, there is no timeframe. We can compare COVID-19 to historical crises and their impacts on the economy and market, but no one is quite sure how far we’ll fall and how fast we’ll rebound.
When it comes to investing, fear and uncertainty drive emotional decisions. We are afraid of loss, but we must remember that we can come back. In a paper published in Liberty Street Economics by Sergio Correia, Stephan Luck and Emil Verner, they acknowledged that areas more severely affected by the 1918 flu saw a sharp, persistent decline in real economic activity. Second, cities that implemented early and extensive nonpharmaceutical interventions suffered no adverse economic effects over the medium term. However, cities that intervened earlier and more aggressively experienced a relative increase in real economic activity after the pandemic subsided.
The bottom line: Pandemics can have substantial economic costs, and assertive action can lead to better economic outcomes and lower mortality rates.
Umberto P. Fedeli is CEO of The Fedeli Group