Today is March 28, 2020, and I want to look at the impact COVID-19 is having on the U.S. economically. Although it has been over two months since the first patient was diagnosed with COVID-19 here in the U.S. the rate of infection still has not peaked and yesterday we saw the highest number of new cases diagnosed to date. As with any reaction so far to COVID-19 the impact on businesses has varied state to state. We see some states that have shutdown all businesses that they do not deem as essential. Then we see other states that have very few if any restrictions. The Cybersecurity and Infrastructure Security Agency (CISA) has identified 16 critical infrastructure sectors whose assets, systems, and networks, whether physical or virtual, are considered so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof. Presidential Policy Directive 21 (PPD-21): PPD-21 identifies 16 critical infrastructure sectors.
To date at least 28 states have shut down all non-essential businesses following the CISA guidelines.
Here is a list of critical infrastructures as identified by CISA. These are not in order of importance but in alphabetical order. Chemical sector: The Chemical Sector is an integral component of the U.S. economy that manufactures, stores, uses and transports potentially dangerous chemicals upon which a wide range of other critical infrastructure sectors rely. Commercial Facilities Sector: The Commercial Facilities Sector includes a diverse range of sites that draw large crowds of people for shopping, business, entertainment, or lodging. Communications Sector: The Communications Sector is an integral component of the U.S. economy, underlying the operations of all businesses, public safety organizations, and government. Critical Manufacturing Sector: The Critical Manufacturing Sector is crucial to the economic prosperity and continuity of the United States. Dams Sector: The Dams Sector delivers critical water retention and control services in the United States, including hydroelectric power generation, municipal and industrial water supplies, agricultural irrigation, sediment and flood control, river navigation for inland bulk shipping, industrial waste management, and recreation. Defense Industrial Base Sector: The Defense Industrial Base Sector is the worldwide industrial complex that enables research and development, as well as design, production, delivery, and maintenance of military weapons systems, subsystems, and components or parts, to meet U.S. military requirements. Emergency Services Sector: The Emergency Services Sector (ESS) is a community of millions of highly skilled, trained personnel, along with the physical and cyber resources, that provide a wide range of prevention, preparedness, response, and recovery services during both day-to-day operations and incident response. Energy Sector: The U.S. energy infrastructure fuels the economy of the 21st century. Without a stable energy supply, health and welfare are threatened, and the U.S. economy cannot function. Financial Services Sector: The Financial Services Sector represents a vital component of our nation's critical infrastructure. Food and Agriculture Sector: The Food and Agriculture Sector is almost entirely under private ownership and is composed of an estimated 2.1 million farms, 935,000 restaurants, and more than 200,000 registered food manufacturing, processing, and storage facilities. Government Facilities Sector: The Government Facilities Sector includes a wide variety of buildings, located in the United States and overseas, that are owned or leased by federal, state, local, and tribal governments. Healthcare and Public Health Sector: The Healthcare and Public Health Sector protects all sectors of the economy from hazards such as terrorism, infectious disease outbreaks, and natural disasters. Information Technology Sector: The Information Technology Sector is central to the nation's security, economy, and public health and safety as businesses, governments, academia, and private citizens are increasingly dependent upon Information Technology Sector functions. Nuclear Reactors, Materials, and Waste Sector: From the power reactors that provide electricity to millions of Americans, to the medical isotopes used to treat cancer patients, the Nuclear Reactors, Materials, and Waste Sector covers most aspects of America’s civilian nuclear infrastructure. Transportation Systems Sector: The Department of Homeland Security and the Department of Transportation are designated as the Co-Sector-Specific Agencies for the Transportation Systems Sector. Water and Wastewater Systems Sector: Safe drinking water is a prerequisite for protecting public health and all human activity. Properly treated wastewater is vital for preventing disease and protecting the environment. Being in the food sector, grocery stores can stay open as well as restaurants, but restaurants are limited to carryout and delivery only. Non-essential businesses would include museums, movie theaters, gyms, daycares, music venues, and malls, as well as personal care retailers like spas, nail and hair salons.
Obviously, you can tell by the map showing the nonessential business closures, that a large section of our economy has been brought to a halt, which will have a very serious impact on our economy. The impact will be so serious that we will most likely be plunged into a recession, although it is still too early to tell how long and how deep it will be. The cost of lost economic activity from the shutdown is likely to cost hundreds of billions of dollars. The worst part of all of this is the uncertainty, we do not yet know how long it will take to get the spread of COVID-19 under control and as such we do not know how long this shutdown will last. Today the total number of confirmed cases in the U.S. passed 100,000 and yesterday’s total for new cases was the highest recorded so far.
Just moments ago, the president signed into law the largest economic relief package in U.S. history estimated to cost a total of 6.2 trillion, and it may not be the last before this crisis is over. I personally have mixed feelings about this relief package. I support workers and small businesses getting the needed help as quickly as possible, but I am not as supportive of the estimated 4 trillion dollars that will be pumped into the markets by the FED. As of today, our national debt sits at $23.6 trillion, this economic relief package will push it close to $30 trillion. There are some analysts who say the size of our debt does not matter because we never have to pay it back, we only must pay the interest. Currently, we can easily cover the interest payments, but I am not as convinced that will always be the case. As you can imagine and probably know the stock market has been hit hard by this crisis. Over the last few weeks, the market had dropped over 30% before bouncing higher this week. Today (Friday) however was another down day with the market dropping about 3.5% due to late day selling, most likely it was caused by investors not wanting to hold positions over the weekend. Because of the huge volatility we have seen over the last few weeks, it’s hard to tell where the market will go from here. In my opinion, this is just a short-term bounce in response to the economic relief package passing. I believe that there is more downside to come, with the market either putting in a double bottom or hitting a new low. We will see how things go over the next couple of days but unless things improve quite a bit over the weekend next week could see the markets continue their move lower. S&P 500 Index Daily Chart
My hope is that the spread of COVID-19 can be brought under control soon and the businesses in this country that are shut down can reopen. One positive I am seeing is that over the last week the daily increase percentage has been dropping. At least it seems like a positive to me, I am hopeful that we will see a peak in the new daily cases and that the curve will break and start to flatten out. In closing, I just want to say I am praying for a quick end to this crisis. I am fearful of the effects a long-term shut down would have on our economy, in my opinion, if this drags on longer than a couple more weeks the damage to the economy would be devastating. I also worry about the effects of a prolonged shutdown on people who are out of work and forced to shelter-in-place, not just financially but also psychologically. I hope you all stay healthy and safe! Donald Hancock www.bigskycrypto.com Sources World Health Organization (WHO): https://www.who.int/ WORLDOMETER: https://www.worldometers.info/coronav... World Debt Clock: https://www.usdebtclock.org/world-debt-clock.html Politico: https://www.politico.com/ ABC News: https://abcnews.go.com/ The Cybersecurity and Infrastructure Security Agency: https://www.cisa.gov/