Posted on by Matthew Freedman

The Importance of Coronavirus Testing in the United States

It seems stupidly needless to say that it’s important for us to have a robust testing program for the coronavirus in the United States.

Nonetheless, that needs to be said.

Testing in the U.S. is still inadequate.

Ben Hunt has written about the inexcusable policy of “Don’t Test, Don’t Tell” in the U.S.

On the Mar. 13 episode of the Post Reports podcast, Martine Powers and Neena Satija explore how coronavirus testing in the U.S. has failed.

On the Mar. 18 episode of the NPR podcast Planet Money, Karen Duffin highlights how slow the U.S. has been to amplify its testing ability.

U.S. testing has improved over the past week, but it is still deficient.

The Case for More U.S. Coronavirus Testing

With more tests, we have more data, which should enable us to make better decisions.

With additional information, we can know with more certainty what measures are necessary in our public health, fiscal, and monetary responses.

In times of uncertainty, even a little more certainty can make a big difference, and right now what is perhaps most terrifying is the unknown.

We know almost nothing. We don’t know how many people in the United States actually have the coronavirus. As a result, we don’t have a solid sense of what the real death rate is.

Because we don’t know how many people already have the coronavirus or how fatal it is, we don’t know how long the quarantining process will or should last, which means we can’t anticipate with any accuracy how bad the economy will be when the coronavirus pandemic has subsided.

As a result, investors are reticent, and many of them have liquidated their positions, which has caused the stock, bond, and metals markets — along with the vast majority of retirement accounts — to drop precipitously in the past month.

On the Mar. 20 episode of the Thoughts on the Market podcast by Morgan Stanley — a podcast that I highly recommend — Chief Cross-Asset Strategist Andrew Sheets makes a strong case for why testing is so important.

The last week has seen a number of major policy announcements designed to combat the effect of the coronavirus outbreak on the financial markets, yet the step that would seem most impactful, based on the number of investors I’ve spoken to, would be increasing U.S. testing.

Recently, we’ve gotten a little bit more optimistic with our allocation based on a large improvement to valuations and aggressive action by central banks, but when I discuss this view, most investors seem skeptical, and most point to the same perfectly reasonable point: The coronavirus is dangerous because it can spread exponentially.

Based on my conversations, uncertainty over which trajectory we’re on is a major factor holding back large asset allocators in the U.S. from stepping into the market and thus why testing is so important.

U.S. testing for the coronavirus has significantly lagged almost every other major developed economy. Without testing, it’s more difficult to know which trajectory we’re on and difficult for markets to gauge the economic impact.

Many policies are currently being enacted to try to help the economy and stabilize the market, but greater testing may help as much or more than any of them.

The Opportunity in the U.S. Markets

It might seem unfeeling to think about money and markets at this time, but there’s a chance that the most significant long-term impact of the coronavirus will be found in the economy, not public health.

Plus, it strikes me that — even in the midst of a pandemic — it would be irresponsible not to consider how I should position my portfolio, not in a greedy way, but in a “I need to do what I can to secure the future for my family” type of way.

If I can avoid losing money in the stock market right now, that’s great. If I can make money now and in the future, that’s even better.

As a wise man once said …

The stock market is presenting us with what could be a once-in-a-generation opportunity — but for equities (as well as our economy) to rebound, we’ll need to get more certainty about the extent of the coronavirus in the U.S., and we won’t get that until we have more testing.

In the absence of that, the investors who emerge from the coronavirus crisis capitalized for the future will be those who bet — and bet correctly — on how great the virus’ impact on the economy will be.

I’m not a financial advisor, and I don’t suggest that you make any decisions based on anything I say or write … but I think the economy and market are going to get worse before they get better.