With everything that is happening in the world, now is a good time to step back and think about where we are and where we might be going. There is a tremendous amount of information available. But what’s missing is a framework for that information that would help clarify the big picture.

What I want to do today is outline how I see that big picture, which will hopefully provide a framework to understand where we are headed. In the next couple of days, I plan to go into more detail on the individual components.

Breaking down the news

First, we have to break down the news. There are three different issues that we need to consider, and the news often conflates them. The issues are (1) the virus itself and the pandemic, (2) the economic impact of the pandemic, and (3) the financial market implications of that impact. By considering them individually, we can gain some clarity.

The virus itself. The base question is whether the virus is controllable or not. And the answer is yes. In the absence of restraints, the virus will spread—as we saw in China, in Italy, and in the U.S. But when proper restrictions are put into place, it can be brought under control. This idea has been proven in China and South Korea, and Italy is now reportedly stabilizing. Here in the U.S., we understand what has to be done, and we are now doing it. This is the end of the beginning.

Unfortunately, we are not out of the woods just yet. Everyone now knows what to do and why, as well as what the stakes are. If we just stay home, things will eventually get better. But there is usually a lag of about two weeks between the time that restrictions are put into place and when new cases stabilize. So, we can expect the news here to get worse for a while. We are likely past the point of maximum danger, but we are not past the point of maximum impact. Even as the rate of spread slows, expanded testing will make it look like things are getting worse. Expect to see that story in the headlines.

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