Barclays Warns Of A Coronavirus Third Wave Lockdown

It’s unlikely, so let’s get that out of the way first. But if a third winter wave of Covid-19 rips through the country and forces state governments to lockdown the way they did in March and April, Barclays Capital has some bad news.

“A policy response in the order of last March and April’s lockdowns could reduce monthly consumer spending relative to current levels by up to 10%, and private non-farm payroll employment by as much as 7.5%,” Barclays economists led by Johnathan Millar wrote in a research report dated December 2.

It’s not the third wave of a viral spread that’s unlikely. It’s the policy response of hard lockdowns that is.

Barclays thinks that the overall containment response this winter will not be as severe as the March to May stay-at-home orders that were part of the Covid-19 policy for the northeast.

Responses will be more modest than they were over that three month period, Barclays thinks, because the main infection spikes are happening in states that are more resistant to harsh measures.

They said that their “preferred estimates” for declines caused by a Covid-19 third wave would be declines in consumer spending and employment as high as 3%.

Voluntary social distancing is also having an effect, anyway, as people are largely staying away from large crowds and being cautious, for the most part. Recent spikes in cases are associated with private gatherings, some of them likely larger than those recommended.


The SARS 2 coronavirus is easily spread, and while it may not be as deadly as first feared, it is the cause of all of the excessive deaths since March, according to the Center for Disease Control.

The policy-induced stay-at-home orders, like those on going in all of Rhode Island currently for two weeks, and in parts of California, plus voluntary social distancing all matter for economic activity. The dominant impact of the virus on the economy is the pull back in personal mobility, which means less spending in public spaces — like restaurants, and shops.  

Still, despite the worsening pandemic in the US, investors are looking at fiscal spending in a Biden government, and looking well into 2021. That’s keeping the market alive and kicking.

Too hopeful?

The U.S. recorded a new high of 2,760 daily coronavirus-related deaths as of Wednesday, with hospitalizations currently topping 100,000.

Those tallies are a reminder that the fight against the pandemic is not over.

Everything is resting on a vaccine. Investor reports are full of commentary that the vaccine changes the landscape and the fear level, and economic sentiment turns positive.

There has been some promising vaccine candidates from Moderna and AstraZeneca/ Oxford in the past few weeks. Pfizer PFE has had some setbacks, but nothing ridiculous.

Investors are looking at the landscape, cashing out of runaway stocks (Blink Electric Power Stations was quite the wild ride!) and looking for new themes.

“Cyclical and value stocks have started to outperform growth stocks,” says Mark Haefele, chief investment officer for UBS.

Vaccine news can either help or hinder the greater equity rally, and talk of a state bailout or fiscal stimulus will keep investors in equities and looking for buying opportunities.

Where are they? For UBS, it’ll be in cyclical and value stocks rising in the near term on hopes for a sustainable economic rebound in 2021. “We expect this trend to continue,” Haefele says.

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