The Vantagepoint Market Perspective: COVID-19 and the Great Outdoors

05/15/2020

 

Across the nation, when it comes to decisions about how to navigate the COVID-19 pandemic, the choices for government officials in recent months have been stark: Close down your state or city and strangle your economy and businesses in an effort to save lives or open it up and potentially put your citizens — particularly the elderly — at risk. 

Varying Paces and Approaches

Different states and localities have taken different approaches to both the closures and the reopenings. For instance, Florida and Georgia, along with a range of other states from Alaska to Texas have lifted many of their restrictions. Meanwhile, strict measures remain in place in other states. In Wisconsin on Wednesday, the state supreme court ruled the governor didn’t have a right to impose stay-at-home rules on people and businesses. Within a day, bars, restaurants, and other establishments in some areas had opened their doors, while other localities quickly imposed their own rules to replace the statewide one that the court had struck down.

The conflicting directives and decisions about closures reflect the difficulty in trying to manage and combat the spread of COVID-19. The truth is that even after months of intense study, much about the virus still remains unknown. In mapping a path forward, we rely on doctors and other medical experts to guide us. And as with anything unknown, knowledge about the virus and how it spreads will gradually evolve as more of its effects and its spread are observed.

When COVID-19 first hit the U.S., the virus was initially viewed as a respiratory illness and, for extremely sick patients, the need for ventilators was highlighted. That prompted headlines and concerns about a potential shortage of ventilators, which fortunately has largely been avoided. In fact, as our understanding of the disease has increased, it appears that for some patients ventilators may do more harm than good, so some doctors have begun moving away from that treatment.

Outdoors Versus Indoors

Another early notion was that the best way to combat the virus’ spread was to keep everyone at home in a bid to bend the curve and not overwhelm hospitals. The stay-at-home orders were intended to minimize human interactions, regardless of the location.

As spring turns to summer and the  weather warms in much of the nation, medical experts are now differentiating between open outdoor spaces and inside spaces, and they are deciding that people may be better off outside than inside. They say folks should still practice social distancing, wear masks, and show caution about getting too close to one another or touching things, but that going outdoors to socialize, exercise, or just hang out may be a good idea.

The hope is the COVID-19 virus may be less infectious in warmer weather, which could help slow its spread. “Parks, beaches — as long as they’re not cheek to jowl, cycling, walking, this is good,” said Tom Frieden, the former director of the Centers for Disease Control and Prevention in a recent article in The Hill. “Enjoy nature. It’s good for us, and it has very low risk of spreading the virus.”

As a result, some cities are rethinking the way their businesses operate and allowing restaurants to expand their outdoor dining areas. Heading outside, while following basic safety protocols, may well be one of the best ways for the country to start to reopen and to get back to some semblance of normalcy. It also helps mitigate some of the mental health aspects of remaining cooped up in the house and having limited contact with others.

Meanwhile, a Northwestern University study found a link between severe vitamin D deficiency and mortality rates in COVID-19 patients. Sunlight helps your skin generate vitamin D, which is another argument in favor of moving what were formerly exclusively indoor activities outside as much as possible.

Back to the Office?

If the evolving medical thinking is that being outdoors is healthier than being indoors, paradoxically this could result in greater economic risk. Put differently, if returning to exclusively indoor work environments such as offices is not safe relative to outdoor locations, some businesses may choose to remain in remote-work environments. And that could make the economic recovery more difficult to some extent — or at least very different from what used to be business as usual.

Firms that successfully transitioned to a remote workforce during the shutdown may well take a cautious approach and continue to operate away from their office buildings for an indefinite period of time until there is more certainty about safely reopening their offices. Focusing exclusively on these decisions, the impact to GDP of whether such businesses operate at home or in the office is likely to be quite modest.

But taking a broader view, business decisions to maintain a remote workforce will have a substantial impact on supporting businesses such as restaurants, parking decks, retail outlets and others that surrounded their formerly packed office buildings before the shutdowns. These businesses that catered to their now-absent office workers are likely to continue to suffer and perhaps shutter, particularly those that relied on high foot traffic to generate revenues. These types of businesses cannot pivot quickly to a different supporting model, and such a transitionary period for the economy could be both painful and extended.

At the end of the day, we still don’t know whether being outside is in fact healthier than being inside, but in many ways, it makes sense. And as medical scientists’ understanding of this disease evolves, we as investors need to follow it closely and study how its ripple effects will shape the recovery, which however long it takes, will inevitably come down the road. 

Disclosures:

This information is intended for institutional use only and is not intended for individual investors or the general public. This article includes links to external websites. While we believe this information to be reliable, we cannot guarantee its complete accuracy.

Please note that this content was created as of the date indicated and reflects the authors’ opinions. These opinions are subject to change, without notice, due to market conditions or other factors.

This is not intended as a solicitation nor does it constitute investment, tax, or legal advice. Reference to any fund or asset class is not a recommendation to buy, sell, or hold that fund or asset class. Neither ICMA-RC nor its subsidiaries are responsible for any investment action taken as a result of the information provided herein or the interpretation of such information. Investors should carefully consider their own investment goals, risk tolerance, and liquidity needs before making an investment decision. Investing involves risk, including possible loss of the amount invested. Past performance is no guarantee of future results.

When Funds are marketed to institutional clients by our Defined Contribution Investment Only (DCIO) team, the Funds are offered by ICMA-RC Services, LLC (RC Services), an SEC registered broker-dealer and FINRA member firm. RC Services is a wholly owned subsidiary of ICMA-RC and is an affiliate of VantageTrust Company, LLC and Vantagepoint Investment Advisers, LLC. Learn more at www.vantagepointfunds.org.

Disclosures:

This website is for institutional use only and is not intended for individual investors or the general public.

This information is intended for institutional use only and is not intended for individual investors or the general public.

Please note that this content was created as of the date indicated and reflects the authors’ opinions. These opinions are subject to change, without notice, due to market conditions or other factors.
This is not intended as a solicitation nor does it constitute investment, tax, or legal advice. Reference to any fund or asset class is not a recommendation to buy, sell, or hold that fund or asset class. Neither ICMA-RC nor its subsidiaries are responsible for any investment action taken as a result of the information provided herein or the interpretation of such information. Investors should carefully consider their own investment goals, risk tolerance, and liquidity needs before making an investment decision.

When Funds are marketed to institutional clients by our Defined Contribution Investment Only (DCIO) team, the Funds are offered by ICMA-RC Services, LLC (RC Services), an SEC registered broker-dealer and FINRA member firm. RC Services is a wholly-owned subsidiary of ICMA-RC and is an affiliate of VantageTrust Company, LLC and Vantagepoint Investment Advisers, LLC. Learn more at www.vantagepointfunds.org.