The Independent Market Observer

Is This the Second Wave?

Posted by Brad McMillan, CFA®, CFP®

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This entry was posted on Jun 23, 2020 2:10:43 PM

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second waveCOVID-19 case growth has spiked up recently in several states, taking the national case growth rate up above 30,000 per day for three of the past four days. So, do we have a second wave on our hands? And if so, what does that mean?

The evidence

New cases rising. We can evaluate the possibility of a second wave with several metrics. The number of new cases, for example, is at or above the level we saw in early May, after a six-week period of relative stability. It is now approaching the highest number of new cases we have seen in the pandemic thus far. This rise is an argument that we are indeed seeing a national second wave.

Positive tests ticking up. We also know the rising number of new cases is not due to more testing. Tests have been running at around 500,000 per day for the past couple of weeks. So, it is not the number of tests. Instead, it is that more people who are being tested have the virus, with the positive rate ticking above 6 percent for the first time since late May. This increase is another argument for a national second wave.

Localized outbreaks. Perhaps the most compelling argument in favor of a national second wave is that there are multiple, widely separated states seeing these outbreaks. Arizona, California, Texas, and Florida cover a much wider range than the outbreaks in the first wave, and they have multiple centers of infection in each. What we’re seeing is clearly not a controlled outbreak in a relatively small area but, rather, a series of outbreaks across much of the country.

Beyond the headlines

But the widespread nature of the outbreak and the size and populations of the states affected are actually arguments against a national second wave, not for it. Because of the size of the states affected, this wave—despite the headlines—is not nearly as bad as the initial wave.

Even as the number of new infections per day is approaching new highs, this number is also based on a much larger base of infections and on a larger target population. When the daily new case count was last above 30,000, the spread rate was 3 percent to 4 percent per day. Now, although we have the same case count, the spread rate remains around 1.3 percent to 1.5 percent per day. This rate matters, because the higher spread rate would double the number of cases in two to three weeks, while the current spread rate has a doubling time of around seven weeks. At a national level, even though we are seeing more cases, the future damage looks to be much less in this wave.

Another way to look at the relative damage of this wave compared with the initial one is to compare not the number of cases but the cases adjusted for population. If you look at the cases per million of population, New York and New Jersey lead the country at around 20,000 (or 2 percent of the population), followed by Massachusetts and Rhode Island at around 15,000. The states with the current outbreaks are at 7,500 for Arizona; 4,700 for Florida and California; and 4,100 for Texas. In other words, with larger populations, the number of cases looks high, even as the actual proportion of the population is much lower. The areas seeing the largest outbreaks are still in much better shape than those most affected in the first wave.

No national second wave (yet)

Looked at this way, while the national case counts are rising, other more relevant national metrics indicate some deterioration—but not a national second wave. We’re certainly not minimizing the damage to the states with the current outbreaks. But most of the new cases come from states that previously had not been significantly exposed. Even with the recent high spread rates, the damage so far has not been close to that seen in the initial infection areas in the Northeast. At least not yet.

The real question is whether these local outbreaks will get worse until they are as bad as what was seen in New York—and the answer to that depends. The experience in the Northeast has shown that social distancing measures, including masks, have helped bring and keep the virus under control. That also appears to have been the case in other areas of the country. The outbreaks have come, in fact, since the reopening. They are therefore likely to continue as long as a significant part of the population does not comply with social distancing measures. State governments in the states most affected now seem to be moving toward recommending those practices, which should help bring the virus back under control and avert a national second wave.

So far, the country is seeing a series of outbreaks in different geographic areas, apparently driven largely by the reopening of the economy and the consequent backing down on social distancing measures. While it could become one, this is not yet a national second wave. The national-level statistics remain under control, despite the rising case count.

Finally, another thing that would distinguish a national second wave would be a national shutdown, which we saw in March and April. At this point, while we may see shutdowns in some states or municipalities, a national one simply is neither necessary nor in the cards.

Not time to panic

In many respects, a series of secondary outbreaks was likely unavoidable as states reopened and experimented to find the right mix of precautions and opening measures. That we are now seeing them is a sign that some states may have to tighten again—and will do so. At the national level, however, the stats remain under control, despite some deterioration. While that needs to be watched, it is not time to panic.

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