How important is the US 2nd wave to US activity?
(I will leave the health dimension for a different time)
(I will leave the health dimension for a different time)
The second wave is arguably affecting about 10 US states, which have seen case growth move up above 2% in recent weeks (after reducing social distancing). Not all states are the same, as testing has played a bigger role in some.
But the increasing hospital pressure, in various states (that have decent data) shows that it is hard to dismiss this wave as about testing alone for all states. 
But the 10 problem states, simply based on highest case growth, only account for 23% of US GDP. Hence, the question is whether slowing activity there is enough to slow the US overall.
I would make three points.
First, politically, it will be very hard to do a full second round lock-down in states like Texas. Hence, the worst case (from econ perspective) is probably that activity drops (say) half-way back to the bottom in April
First, politically, it will be very hard to do a full second round lock-down in states like Texas. Hence, the worst case (from econ perspective) is probably that activity drops (say) half-way back to the bottom in April
Second, if we assume that all 'problem states' retrace 50% of the recovery achieved so far (using alt data), it will not be enough to counter the positive impulse from reopening in states such as NY, NJ, MA, IL, MI (those states have bigger weight + are coming from lower base).
Third, the key point therefore is whether a 2nd wave will 'broaden' to a longer list of states. For example, California. CA has been in the 'grey zone' with some pickup in case growth but no dramatic increase in hospital pressure. Which side will CA tip to?
The reason the equity market is recovering is linked to this differentiation between US states. Some look problematic, others (such as NY) look like their re-opening will resemble the the European process (generally starting later, and successful).
We also had a scare in China on Monday. But if they could handle the (big) first wave. They can probably also handle an additional wave (which seems much smaller, based on the data we have at hand at this point).
I will leave it at that. I have left out the health dimension, to focus on econ in this thread. We will get back to hospital pressure etc. separately.
