The end of the beginning?
27 Mar 2020
Ben Kumar , Investment Strategist

Yesterday was a tipping point in humanity’s war against COVID-19. Donald Trump finally understands that this isn’t a foreign problem. Brutal as it sounds, Americans are dying in enough numbers for the US to commit itself to the war.

It’s a familiar pattern. Early in World War I the US remained neutral, with President Woodrow Wilson content to keep the conflict away from his borders. But in 1915, 128 Americans died on board the RMS Lusitania, causing outrage in the United States. Two years later, after a lot of political wrangling, the US entered the war.

In 1939, President Roosevelt pursued an almost identical strategy. The US remained neutral in World War II, until the Japanese attack on Pearl Harbour in December 1941. The deaths of over 2,400 Americans catapulted the US into the war overnight – although it took another couple of years for boots to hit the ground in Europe.

So, here we are again. This time last week there were fewer than 12,000 confirmed cases of COVID-19 in the United States. Now there are more than 85,000 confirmed cases: the most in the world, eclipsing even China. In New York alone there are nearly 40,000. The time has come for the US authorities to accept that viruses don’t respect positions of neutrality, and for President Trump to take his fingers out of his ears.

We expect the case numbers in the US to soar further as the testing continues. The weekend could be very nasty indeed, and might scare investors in the next week or so. But we think the US is finally coming to view COVID-19 with the respect it deserves.

Mr Trump has proclaimed that the rise in case numbers is “a tribute to the amount of testing that we’re doing.” While that statement partly reflects the President’s typical positive spin on events, there is no denying that the US is now taking things seriously. It’s now testing more than 100,000 people a day, in line with the best course of action suggested by the WHO. America has finally entered the war on coronavirus.

It will take some time before the impact of a co-ordinated US response is seen – although the news that 3 million people lost their jobs last week will certainly sharpen the focus for President and Congress. But the resources that the US can bring to bear are what’s needed to win the fight, whether it’s the $2 trillion in stimulus, vast manufacturing capabilities, or access to cutting-edge medical research.

At the Second Battle of El Alamein in 1942, ground troops from Britain, France, India, South Africa, Australia and New Zealand were supported for the first time by the US Air Force. The victory gave a taste of what was to come once America committed fully to the war effort.

We are in a similar situation now. The change in the American approach means that the world is now allied against COVID-19, and in time the tide will turn. As Winston Churchill declared after El Alamein:

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

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