Updated: Nov 4, 2020
We are now in a Second Wave of COVID that is spreading more virulently than anything before, but where the mortality rate appears to have fallen significantly.
According to Worldometers:
In France, there were 52,518 new cases yesterday and 416 new deaths;
In Russia, there were 18,648 new cases and 355 deaths
In Germany, there were 16,240 new cases and 112 deaths
In Spain, there were 18,340 new cases and 127 deaths
A recent article by NPR supports this view:
Two new peer-reviewed studies are showing a sharp drop in mortality among hospitalized COVID-19 patients. The drop is seen in all groups, including older patients and those with underlying conditions, suggesting that physicians are getting better at helping patients survive their illness.
The study, which was of a single health system, finds that mortality has dropped among hospitalized patients by 18 percentage points since the pandemic began. Patients in the study had a 25.6% chance of dying at the start of the pandemic; they now have a 7.6% chance.
To combat the crisis, many countries are resorting to a second lockdown. This is, however, not yet a full lockdown. Looking at France and Germany, for example:
Non-essential and leisure travel have been banned, but business travel is allowed.
Restaurants and bars have been closed, but many small stores remain open. So in Munich, Louis Vuitton was open, while the Hofbrauhaus was closed. The stores are letting in only a limited number of people.
Venues such as museums or concert halls have been closed, but hotels are open.
Schools remain open, but universities have switched to distance learning.
The rationale for this is clear: increasing evidence shows that COVID-19 spreads through aerosol transmissions. That’s why we are all wearing masks: to prevent the spread of infection mainly from ourselves to others.
That’s also why citizens of some countries wear masks during flu season. It’s to protect others, as well as themselves.
Since you have a higher chance of opening your mouth in a restaurant rather than in Louis Vuitton (except in shock at the price?) it is clear why restaurants are closed, and why masks are worn.
So, the key dilemma we need to consider is the following:
a. In March – April, 2020, the full lockdown in Europe took about 2 months to take effect, but led to a major eradication of new cases and deaths.
b. In October 2020, we have a partial lockdown in Europe, but many transmission points remain open: schools, companies, etc. Moreover, the number of new cases in the Second Wave is over 5 times the height of new cases in the First Wave.
So, do we believe that a more limited number of lockdown interventions will successful reduce the new cases within one month, when these cases are significantly more than the First Wave?
Our estimate is that it will be difficult to get the number of new cases down to First Wave levels (which was already high!) without:
Shutting primary and secondary schools;
Requiring at least 90% of staff in companies to work from home;
Close all non-essential businesses;
Closing mass public transport.
We are perfectly aware that these choices are politically unpalatable. But consider the alternative:
By the beginning of December, we doubt that new case numbers will have fallen by more than 25-30% of the current totals. This means that the current measures will have to be extended by at least one month, lasting through Christmas and the New Year.
Even if we assume that after 2 months, the new cases per day fall by 60%, that will still be 100% over the First Wave numbers. So in France, for example, a 60% fall on the current caseload of 40,000 new cases per day results in 25,000 cases per day. That’s still 150% the First Wave maximum new cases per day. Which is unacceptable.
We face five conclusions:
1. Absent a full lockdown, the caseload will not be satisfactorily reduced. A full lockdown may take 2.5 – 3.0 months to show effects at current transmission and morbidity rates.
2. Governments are avoiding a full lockdown due to political and economic costs. This means we will have a rolling extension of limited lockdowns, which will hopefully keep the mortality rate low. We anticipate that the limited lockdowns will last until March 2021 at minimum.
3. In both cases, however, political costs will be high (as citizens grow every more tired of renewing limited lockdowns) and economic costs will be high as small enterprises go bankrupt, and government budgets are stretched to pay for furloughs and other mechanisms.
4. The high caseload is likely to last until April-May 2021 until weather conditions, a vaccine and the natural transmission rate is reduced.
5. The economic damage will be severe: we anticipate that 2021 will be a worse year, economically speaking than 2020, both in terms of public finance impact as well as due to enterprise closure.
As a result, we want to repeat the advice we gave on multiple occasions so far this year:
a. As individuals, take all possible measures to reduce your exposure to high-risk transmission events. Avoid crowded, indoor areas; wear a mask and other protective measures; maintain social distancing; do everything possible to boost your immune system. Be careful in public transport and other transmission vectors; avoid large gatherings.
b. As companies, take all possible measures to reduce expenditure, safeguard cash and cash runway, and prepare for a second bad year in 2021, following a bad year in 2020. (Of course, there are some companies poised to expand during the crisis, and there are others that will see opportunities as a result). Be prepared for a significant downside, but also for opportunities which may emerge.
As always, if we can support you, please do not hesitate to contact us.
Navigator Consulting Group
NPR. 20 October 2020
Worldometer. 4 November 2020
Navigator Consulting. 14 September 2020
Navigator Consulting. 3 September 2020
Navigator Consulting. 3 August 2020
Navigator Consulting. 13 July 2020
Navigator Consulting. 8 May 2020
Navigator Consulting. 1 April 2020
Navigator Consulting. 18 March 2020