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Dow Booms on Virus Hopes – But Economists Fear Double-Dip Recession

Last Updated September 23, 2020 2:26 PM
Josiah Wilmoth
Last Updated September 23, 2020 2:26 PM
  • The Dow exploded higher on Monday, which saw massive gains across the global stock market.
  • The Trump administration is unloading every round of ammunition it has to make coronavirus treatments and vaccines available as quickly as possible.
  • A majority of economists believe there’s a significant risk the U.S. economy slides into a double-dip recession.

The Dow Jones bulls are in the driver’s seat on Monday, and the blue-chip index rose more than 150 points in mid-morning trading.

Stocks are trading up as the U.S. government goes all-in on bringing a coronavirus treatment to market.

Dow Rockets Higher as Global Stocks Surge

As of 10:01 am ET, the Dow had gained 152.71 points or 0.55%. The index last traded at 28,083.04.

dow jones today august 24
The Dow jumped more than 150 points on Monday. | Source: Yahoo Finance 

The S&P 500 and Nasdaq shot even higher, advancing 0.64% and 0.69%, respectively.

U.S. stocks took their cues from global equity benchmarks, which rose across the board overnight as American traders slept.

In Asia, the Hang Seng Index closed 1.74% higher, while Korea’s KOSPI jumped 1.1%.

Some European indices rose even higher. The DAX shot up 2.03%, the FTSE 100 leaped 1.42%, and the STOXX 600 raced to a gain of 1.43%.

Trump Goes All-In to Fast-Track Coronavirus Treatments and Vaccines

The Dow appears to be rallying on the Trump administration’s scramble to fast-track both a coronavirus treatment and a COVID-19 vaccine.

On Sunday, the Food and Drug Administration (FDA) authorized emergency use of convalescent plasma  to treat hospitalized COVID-19 patients. This treatment – which has not been approved for general use – utilizes antibody-rich plasma from coronavirus survivors.

Here are former FDA chief Scott Gottlieb’s thoughts on the therapeutic treatment:

Almost simultaneously, the Financial Times reported that the Trump administration  has mulled a plan to sidestep “normal… regulatory standards” to fast-track an experimental coronavirus vaccine candidate developed by AstraZeneca and Oxford University. AstraZeneca stock rose 2% today.

The twin developments unsurprisingly triggered a tidal wave of backlash from Trump’s political foes, who allege that the White House is more concerned about rushing coronavirus drugs to market before the election  than ensuring they are both safe and effective.

donald trump attacks FDA
Trump’s critics allege he is advocating for a reckless approach to coronavirus drug development to bolster his electoral prospects. He claims the “deep state” is deliberately slow-walking clinical testing. | Source: Twitter 

Just one day earlier, Trump had scorched the FDA in a tweet , raving that the “deep state, or whoever, over at the FDA” was deliberately sabotaging the approval process , presumably to weaken the president’s reelection odds.

Economists Warn a ‘Double-Dip’ Recession Is Very Much on the Table

Although critics allege the Trump administration’s coronavirus strategy betrays misaligned priorities, there’s little debate about the stakes of producing an effective coronavirus vaccine.

A new survey from the National Association for Business Economics  (NABE) found that economists view fighting COVID-19 as the White House’s most important policy consideration in 2021.

dow jones, u.s. economy
While the Dow continues to grind higher, almost half of economists believe U.S. GDP will remain below pre-pandemic levels until at least mid-2022. | Source: NABE 

Addressing the pandemic ranks even higher than stimulating the economy. That’s particularly striking given how bearish their economic projections are.

Only 15% of respondents believe the recession ended in Q2 2020. Roughly half believe U.S. GDP won’t recover to pre-pandemic levels until at least 2022. And a full 80% believe the odds of a punishing double-dip recession are at least one-in-four.