Nevertheless, he believes that the U.S. is likely to reach pre-pandemic levels of illness around this summer.
A faster pandemic recovery means a stronger, more accelerated economic recovery, especially among consumers, said Vandergrift. “The consumer balance sheet is healthy, but there’s still pent-up demand,” he said. “This is a human crisis, not an economic crisis. In traditional recessions, there’s a restraint on demand due to lack of income, but for the aggregate consumer in this case, that’s not true. Personal income is healthy.”
To date, after an initial shock and rapid partial recovery in the late spring of last year, the U.S. economy’s return to normal, as measured by Columbia Threadneedle’s Return-to-Normal Index, has stalled. Even the vaccine rollout has yet to move the needle, because to date, most of those who have been fully vaccinated are essential workers, who never had the option of working from home, immune-compromised and infirmed Americans, whose economic activity was already restricted, and the elderly.
Vandergrift expects that to change with the expansion of vaccinations and a return to warmer weather. “There’s $1.4 trillion in excess savings that could be spent,” he said. “There’s a lot of desire to get out and go spend, so if the forecast is accurate that we’re going to reach herd immunity, restrictions will be lifted and an unbelievable wave of demand is going to return to restaurants, travel and entertainment this summer. That’s what we’re forecasting.”
Lagging areas of recovery are likely to remain around business, as offices will be slower to open than leisure, entertainment, restaurants, retail and schools, said Vandergrift. Business travel is likely to remain suppressed.
While there may be more online shopping or “omni-channel” consumer activity, Vandergrift expects foot traffic for brick-and-mortar retail and entertainment to return to pre-pandemic levels under Columbia Threadneedle’s scenario. He’s based those assumptions off of the pace of the return to normalcy in areas that have successfully constrained the virus’s spread, like Israel and Hong Kong.
Because of the speed of the economic and market recovery, there isn’t likely to be long-term financial damage, said Vandergrift, making broad fiscal stimulus unnecessary. In some ways, it wasn’t a major impact at all, he said, explaining that up to 70% of the U.S. economy was only affected in “very limited” ways by the virus.
Vandergrift particularly questioned the need for $1,400 stimulus checks for such a broad swath of Americans.
“We don’t need so much of this fiscal stimulus, we need extremely targeted stimulus at the consumers and businesses in highly impacted verticals,” he said. “We don’t need a $1.9 trillion stimulus package right now that delivers $1,400 to almost every consumer. In aggregate, the average consumer is very healthy, their savings are up, and their revolving credit is down. They don’t need this.”
Kleyman added that there is still little known about the persistence of protection against the virus—while those who recover from Covid-19 seem to have at least several months of immunity, the immunity imparted by vaccines appears to be much stronger and longer-lasting.
However, if the virus is successfully slowed and minimized by this summer, the U.S. and other developed nations will have established the production and infrastructure necessary to continue to effectively battle the virus, including new strains and pop-up outbreaks around the world, said Kleyman.
“In the coming months, we’ll figure out the [level of necessary] protection, and it will serve as a guide for us to understand how and how often we need to be vaccinated. Do we need more booster shots? If we’ve received the original vaccines, do we now need another with broader protection against other variants?” he said. “We’ll have that over the next couple of quarters, and we’ll be able to manufacture and distribute these additional vaccines, if necessary, in a matter of months. The FDA has already received guidance to approve a second generation of vaccines much quicker than this first generation.”