Fauci warns reopening too fast may 'turn the clock back' on economic recovery

Raymond James Healthcare Policy Analyst Chris Meekins joins Yahoo Finance’s Seana Smith to discuss Dr. Anthony Fauci's comments during his virtual testimony before the Senate Health Committee on Tuesday.

Video Transcript

SEANA SMITH: For more on this, I want to bring in Chris Meekins, Health Care Policy Analyst at Raymond James. And, Chris, we just heard what Jess was saying about what Dr. Fauci was warning of earlier today. He was saying that suffering and death could be avoided and of further economic damage if the states do reopen too quickly. What's the economic risk, do you think, of reopening too early at this point?

CHRIS MEEKINS: Well, I think the real question is are people going to go out if they don't feel safe? And if you see an uptick in the number of cases, if you see an uptick in the number of deaths, you're going to have a portion of the population that will just choose not to engage.

What we saw in China was even when they were required to go back to work, people went back on the roads Monday to Friday, but when it came to the weekends, the roads were empty. So you really-- just because you're requiring people to go back to work or saying they can go back to work doesn't mean they're going to actively engage in the economy.

And when I look at where the country is overall-- and we actually did an analysis looking at the president's gating criteria-- so symptoms, cases, hospitalization, and what we found was, as of Sunday, only 10 states met all three criteria. The vast majority did not.

SEANA SMITH: And you mentioned that fact, and we've been talking-- time and time again we've been asking a number of doctors here on the show about whether or not they think that the economy or these states are opening-- reopening their economies too early. And when we drill down into that, the big question mark here is the possibility of a second wave, and Dr. Fauci briefly touched on that earlier today and if we do see a second wave, how bad the resurgence will be and the number of cases and then, taking it a step even further, how states will then likely respond to an increase in cases or a second wave. How do you see that playing out?

CHRIS MEEKINS: Yeah, I think that's a great question, Seana, and really is the question that our clients at Raymond James are asking me nonstop. And at the end of the day, I think it's important to realize a second wave implies we have finished the first wave. And from my perspective, this wave is likely going to continue as we start to reopen, and you're going to see an uptick in cases. You're going to see more deaths.

The good news is that we've made our health-care system more resilient with ventilators, with masks, and we now know that when there's an uptick in COVID cases in a community, the number of elective surgeries drop off. Now that has other health-care issues, but we know that the odds of a hospital being overrun across the country are pretty low at this point now because of the mitigation steps.

So the decision makers had to decide, at the end of the day, if you know you're not going to get testing where you need it to be probably for at least another 30 days, you know the fact that you don't really have contact tracing where it needs to be at this point-- if you're not going to wait until you get those two things in place, then at some point you make a decision to reopen, and that's what they've decided to do.

SEANA SMITH: And if they do reopen too quickly, if we do see this massive surge in the number of cases-- whether or not you want to say it's a continuation of this current wave or if we do see what other people are referring to as a potential second wave-- I guess how big of a challenge do you think it will be in order to issue another lockdown?

CHRIS MEEKINS: Yeah, I think it's really unlikely you're going to see politicians issue another lockdown statewide or nationwide. We already saw protests starting toward the end of this lockdown. And I think as part of that, you see the public is kind of-- I don't want to say over that. I hope that they will continue to take appropriate mitigation steps, but there will be big backlash from the public. And then secondarily, it would be politicians basically admitting, yeah, they were wrong. They reopened things too soon, and they didn't have in place everything they needed to prevent the need to lock down again. So I think we're at a point where, while they may encourage a local community, a local school, a local city to maybe put in place some restrictions, it's unlikely you're going to see them statewide or nationwide.

SEANA SMITH: Chris, what do you think about the restrictions being issued sometimes on a federal level and then at possible state level and then down to the local level? It's leading to some confusion. We were just talking in the last block of the 1:00 P hour about Elon Musk defying orders, reopening one of his plants in California. But, I mean, when we try to drill down to this, whether or not it should be something that's practiced on a national scale or state scale or even down to the local level, I guess what do you think is the best way to go about this?

CHRIS MEEKINS: Well, ideally you would have a national set of guidelines that states would feel comfortable with, and then the state communities would look at how those guidelines impact their community and apply them appropriately and consistently across the country. It's really difficult for businesses that operate in multiple states and multiple communities to try to track how to engage on all these different levels.

And I know there are a lot of lawyers spending a lot of time trying to advise companies on what that means, but it's just really difficult from an economic perspective. And so I think if you really want to get the economy back, if you really want to give people confidence, you need to take specific steps. And part of that is ramping up the testing and the contact tracing, and we're not there yet. I think we can get there as a country, but we should assume that until we do, you're going to see more cases uptick. May not be a massive uptick like New York, but you are going to see cases start to go up and deaths go up, and that's going to prevent people from really engaging in the economic system.

SEANA SMITH: Yeah, Chris, I wanted to ask you about this because as we do get ready for this next phase in the response to coronavirus, I mean, what is missing? Is that those two things that you just mentioned? Is it the testing? Is it the contact tracing? Is that what we really need here in order or before we should take additional steps?

CHRIS MEEKINS: Yeah, the two things that we can control, basically, are contact tracing-- meaning we have enough people that can go out, and every time you identify an infection, go to everyone they've been in contact with, and we can test those people. We should be able to be in a better position from a testing standpoint than where we are now.

Now in an ideal world, we'd have better treatment protocols. We'd have therapeutics. We'd have a vaccine. But all of those take a little time, and the US and the pharmaceutical industry are moving at unprecedented speed to try to make that happen. So the things we can control are testing and contact tracing, but if we're not going to really do those-- which the government showed it really wasn't, and they dropped the ball. Then the question becomes how much damage are you willing to do for the US economy and for how long? And they've decided, and a bunch of states have decided we're ready to accept the fact more people are going to get sick, more people are going to be hospitalized, and more people are going to die because we can't take the economic pain.

SEANA SMITH: Chris, I know you-- in addition to the economic impact that the virus is having, I know you closely watch the market's recent performance. And when you take a look at those two things-- we've been talking about this now for quite some time. We get weak economic data over and over again, yet the market is able to discount this and look past it. And seeing where the market is valued today, this recent performance that we have had if you take into account the performance in the month of April and then even over the last couple of days, I guess my question to you is do you think that the market is overvalued at this point?

CHRIS MEEKINS: I do, and we actually do a weekly call with all of our clients on COVID, providing the updates with multiple Raymond James analysts, including our equity strategist, Tavis McCourt. And when we polled our folks and asked them, hey, do you think the market's going to reach new highs? Do you think it's going to reach new lows this year? Do you think it's going to go up or down? More than 60% of those folks believe the market has already reached its highs for the year and will go down, and more than 25% of those people participating said that they anticipate reaching new lows, meaning below the lows we saw in March.

So I think a lot of folks have the perception that things are overvalued at this point, but there's no question there are specific areas that you can still find value in health care and still find value in the economy if you look for specific stocks.

SEANA SMITH: Yeah, Chris, I wanted to ask you about that. I guess where do you see the value specifically within health care? What are some of the names or some of the trends, I guess, you're seeing emerge that could be a potential buying opportunity?

CHRIS MEEKINS: Yeah, I think that we've seen a really good rebound in biotech. That's really impressive. I think that some of the managed care has gone up. I think there's still upside there. You have hundreds of millions of dollars that-- hundred billions of dollars going to providers as part of this COVID things. So if they can get through the next few weeks and with potentially new stimulus funding-- House Democrats just moments ago released their bill that would have proposed doing more than $100 billion on top of that for providers. So there's still some valuation pieces there. And I think, you know, medical device and med tech, largely speaking, doesn't have to worry about a lot of the policy implications that we're seeing elsewhere. And if we see a rebound in elective surgeries like we could say, I think there's upside there.

SEANA SMITH: All right, Chris Meekins, health care policy analyst at Raymond James, thanks so much for taking the time today.

CHRIS MEEKINS: Thanks, Seana.