While the US has finally peaked, we continue to see countries struggling with local/regional outbreaks. In many European countries, the number of new cases is rising but the pace is different. Some countries are struggling with second waves, while others are experiencing 'second waves in slow motion'. In other words, we have begun the 'dancing' part of the 'hammer and dance' strategy (see Maastricht University for an explanation), which we believe will probably continue until a vaccine is ready.
However, we know if the situation is not handled correctly, it can quickly spin out of control. As long as there is no vaccine, countries cannot lower their guard too early. This is why we are seeing more countries tightening restrictions, making local and targeted lockdowns and postponing further reopening of the economy. More severe COVID-19 outbreaks and containment measures may cause the economic recovery to take a break in Europe, as we have seen in the US.
Politicians still seem reluctant to close down the entire economy again due to the high economic cost and, in our view, the nuclear option will be applied only if the pressure on hospital capacity starts to increase significantly. As it seems as though the new outbreaks are hitting mostly young people and hospital capacity has increased, the pressure remains subdued at this point, despite the second waves being as big as the first ones in some countries/areas. Instead, we expect targeted, local lockdowns to remain the way forward.
