Stocks Will Take A Hit From Second Wave Of Coronavirus, Wall Street Firm Warns Clients

Much like what is happening in Europe, the United States will likely see a second wave of coronavirus that will hurt markets and slow the reopening of the economy, Wall Street investment firm Bernstein warned clients in a recent note.

A top World Health Organization official said Thursday that Europe is facing a “very serious situation” as countries like Spain and France see an alarming rise in new cases of coronavirus.

Bernstein warned that the United States, which has so far seen rolling waves of coronavirus infections in different regions, is poised to get hit by a similar second wave over the next few months.

The best-case scenario, according to Bernstein, is that the most recent U.S. hot spots can stabilize at around 60 cases per million people per day—roughly the level held in the northeast region since it endured its first wave in March and April.

“The Northeast has been slower to reopen as much as Europe has (still no indoor dining or international travel without quarantine) and thus we have not seen the second wave yet,” the firm said.

But as parts of the economy continue to slowly reopen—with people now starting to go back to school and the office, another surge in the Northeast and across the rest of the country looks likely, the firm told clients.

A true second wave of coronavirus hitting the United States “will become an issue within a month,” Bernstein predicted, warning that investors and the stock market are “going to take some pain.”

What To Watch For

Although fears of a second wave will undoubtedly weigh on stock market sentiment, there are reasons to be optimistic, Bernstein says. The next wave won’t necessarily be as bad as the first ones, since a younger group of people seem to be getting infected and hospitals are no longer at capacity. What’s more, in some regions of the country, 15% or more of people are estimated to have already contracted the virus, which means they are more unlikely to be infected again for some time. 

Crucial Quote

“The hope for the U.S. is that the impact would be moderated by being ‘bad enough’ already,” Bernstein’s note said.

Key Background

There have now been more than 30.2 million global cases of coronavirus, with around 6.7 million in the United States alone, according to data from Johns Hopkins University. Nearly 200,000 Americans have died from the disease, while global deaths have almost reached 950,000.

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Sergei Klebnikov

Sergei Klebnikov

I am a New York—based reporter for Forbes covering breaking news, with a focus on financial topics. Previously, I wrote about investing for Money Magazine and was an intern at Forbes in 2015 and 2016. I graduated from the University of St Andrews in 2018, majoring in International Relations and Modern History. Follow me on Twitter @skleb1234 or email me at sklebnikov@forbes.com

CNBC’s Bob Pisani looks ahead to the day’s market action. Stocks dropped on Monday as investors grapple with signs of a second wave of coronavirus cases as the U.S. economy reopens. The Dow Jones Industrial Average fell 266 points, or 1.1%. The S&P 500 slid 0.7% while the Nasdaq Composite traded 0.3% lower. Stocks which stand to benefit the most from a successful reopening led the losses. Carnival and Royal Caribbean cruise lines each lost more than 4%.

United Airlines lost 3.7% and American Airlines slid 3.5%. Retailers Kohl’s and Gap declined. These types of stocks surged in May as investors bet that the worst of the virus was over. “We’re in the midst of a correction,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “The coronavirus is spiking up again and that’s a problem. There was also over-exuberance in the market. The market was discounting a quicker economic rebound.” The action Monday followed a big pullback last week triggered by rising fears of a resurgence in the virus as well as investors’ profit-taking after the massive comeback.

The Dow and S&P 500 lost 5.5% and 4.7% last week, respectively, while the Nasdaq shed 2.3%. All three major equity benchmarks suffered their worst week since March 20. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2JdMwO7 » Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision » Subscribe to CNBC: https://cnb.cx/SubscribeCNBC » Subscribe to CNBC Classic: https://cnb.cx/SubscribeCNBCclassic Turn to CNBC TV for the latest stock market news and analysis. From market futures to live price updates CNBC is the leader in business news worldwide. Connect with CNBC News Online Get the latest news: http://www.cnbc.com/ Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC Follow CNBC News on Facebook: https://cnb.cx/LikeCNBC Follow CNBC News on Twitter: https://cnb.cx/FollowCNBC Follow CNBC News on Instagram: https://cnb.cx/InstagramCNBC

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