Viruses, Recessions, Imagination and “the End of the Beginning.”

Gavin Baker
5 min readMar 19, 2020

Six weeks ago the idea that America would be shut down and in the grip of a severe recession was unimaginable to many. And rightly so. We are living through a very low probability public health and economic outcome that was mostly created by institutional failures around virus containment.

Now the idea that America — and the world — will begin to restart in three to six weeks is similarly unimaginable to many despite this being a *much* more likely scenario than the current shutdown was only six weeks ago. In fact, I would go so far as to say that America beginning to restart in three to six weeks is overwhelmingly likely. Ten weeks is the latest that I can reasonably imagine America beginning to restart. We will still be in a severe recession and the Coronavirus will still be present in America as it restarts, but Americans will be leaving their houses, they will be going to back to work, they will be going to stores and they will be going to restaurants. Restarting does not mean that America will be “back to normal,” but it does mean that America will begin to return to normalcy. Restarting does not mean that the recession will be over, but it will make the end of this recession easier to imagine.

A true return to normalcy will take much longer given the magnitude of the recession we are in and there will likely be many new public health realities. i.e. Americans over 65 may be asked to quarantine themselves for longer than those under 65. Longer term, I suspect temperature sensors will be widespread and we will have specialized fever hospitals. Regardless, the snapback rally caused by America restarting will be violent like most bear market rallies. We may go on to make new lows in the market after this first snapback rally. Important to remember that we are in a severe recession that is unlike any recession to date in terms of the velocity of the slowdown.

As I detailed in my previous post, the combination of social distancing and warmer weather will likely slow the virus down. The emergence of potentially effective treatments like Remdesivir (called “Remdesivoir” by some), There will be more surgical masks. There will be more ventilators. Tests will be widely available. We will likely find more effective treatment regimens. All of this will help when the Coronavirus makes its very likely seasonal return in November. Work will progress quickly on vaccines, which will be game changing for 2021 even if they are only partially effective like the flu vaccine. Perhaps the biggest positive from all of this is that the world will be much better prepared if and when there is another pandemic. Always bet on humanity.

Headlines over the next few weeks are going to be terrible. Some surveys indicate that 20% of Americans are already out of work or seeing reduced work hours. State level initial unemployment claims suggest that next week’s initial unemployment claims number may be the largest increase in history. We haven’t even really seen credit card data for the first two weeks of March yet, but the Opentable data and Uber commentary suggest it will be awful for all except those retailers who sell food and essential goods. March and April will likely be the sharpest contraction ever in economic activity and GDP. There will likely be large numbers of bankruptcies. CEOs, founders, executives and small business owners are going to have to make hard choices to survive and many will not survive. Time is of the essence and better to overreact than underreact as if a CEO or business owner underreacts they may not get a chance to rectify their mistake. But this too shall pass.

I am willing to bet that Americans will begin to go back to work no later than Memorial Day and most likely no later than mid to late April. Quick service restaurants will probably feel the benefit first as everyone will be tired of cooking, then table service restaurants, then services like haircuts, then stores for non-essential items, then casinos (gambling is addictive after all) and then finally travel. Maybe I am wrong about the order or the timing, but I am reasonably confident that I am directionally correct. Social distancing and warmer weather will reduce transmission. The vast expansion in testing will give politicians and businesses the confidence to encourage and ask Americans to return to work. Increased knowledge and widespread distribution of potentially effective treatments will reduce fear. America will adapt to a new public health reality. America will begin to restart.

The country will still be in a severe recession as it restarts and will remain in a recession after it restarts, but the truly massive fiscal stimulus being proposed in Congress in combination with what I understand to be the most extreme action ever taken by the Fed will likely result in GDP stabilizing by the fourth quarter of 2020. The market panic has driven policy panic. Fiscal stimulus may be multiples of what it was in the global financial crisis. Direct cash payments would be powerful, but I am amazed at the range of positive and radical solutions currently under consideration — any of which would be helpful. Massive fiscal stimulus in some form will be passed and we will see more action from the Fed before this is over. Remember that the “Americans always do the right thing, but only after trying everything else.”

Just as the severe recession — and public health situation — we are living through was unimaginable only several weeks ago, America restarting at some point seems equally unimaginable but is inevitable. The world rarely ends. In fact, it hasn’t ended at any point to date. And it generally pays to bet that the world will not end. We may not have yet seen the bottom of this bear market, but to quote Churchill again, we have at least seen “the end of the beginning” of this bear market.

*As always, I reserve the right to change my mind. And remember that “Fear is the mind killer.”



Gavin Baker

Founder, CIO & Managing Partner, Atreides Management LP. Former Portfolio Manager, Fidelity OTC Fund. No investment advice, views his own. More: