Key Points

  • A second wave of global COVID-19 is getting a lot of media attention, but the appearance of a global second wave of cases is primarily driven by the different timing of first waves across countries—rather than second waves within countries.

  • The falling trend in deaths may be the more important factor to watch since the trend in stocks and earnings expectations are more closely aligned with deaths than cases.

  • A second wave of deaths could lead to a second wave of declines for the economy, corporate earnings and the stock market.

In the past couple of weeks, markets have been reacting negatively to rising new virus case data in some countries and U.S. states. This begs the question: is the world experiencing a second wave of COVID-19 cases? It may look that way in the chart below. But looks can be deceiving when it comes to the rise in new cases. More importantly, deaths have not seen the same rise. Let’s examine what might it all mean for the economy, earnings, and the stock market.

New COVID-19 cases and deaths


Source: Charles Schwab, Bloomberg data as of 6/20/2020.

The appearance of the above chart clearly shows an uptick in new cases worldwide, but that is not the result of each country experiencing a second acceleration in new cases. Instead the pattern is caused by some countries experiencing their wave of cases later than others. This is illustrated in the chart below. Italy saw its wave peak in late March, while India saw its wave begin at that time. If we were to add these two countries together the pattern reflects the global trend in new cases in the chart above.

First waves, different timing: Italy and India


Source: Charles Schwab, Bloomberg data as of 6/20/2020.

Second waves

The global pattern of new cases is primarily driven by the different timing of first waves. However, there are some countries that are experiencing second waves, including Sweden, Iran, and potentially Israel. Even as the number of cases rises in these countries, the number of new deaths continues to fall (except in Iran). The trend in deaths may be the more important driver of how people and policymakers respond to a second wave.

Second wave: Sweden


Source: Charles Schwab, Bloomberg data as of 6/20/2020.

Second wave: Iran


Source: Charles Schwab, Bloomberg data as of 6/20/2020.