Recovery – When, How

I remain convinced the coronavirus’s health and humanity issues will need to be under control before an economic recovery can even be fully contemplated. Quite frankly, I’m not certain we have reached that point yet.

Nonetheless, we do need to be making plans to increase the likelihood of a strong economic recover now! It appears Congress and the White House have agreed to a strong economic package that along with the Fed’s very aggressive actions should go a long way towards addressing the economic impact of COVID-19.

The stock market has a fairly well deserved reputation for being a predictor of the economic well-being of the economy. Although it was not very far in advance of the potential impact of COVID-19, this chart makes it very clear that it very quickly realized it was going to be very big and very bad!

At this point, all I can offer is hope that the market is comfortable with the situation and has found a bottom. Give me a couple of months, I’ll be able to give you a more confident answer.

The next question / concern is the shape of the recovery for the economy and the stock market. This chart from Danske Bank [I don’t know who that is] would suggest a very sharp decline in GDP followed by a very sharp increase and recovery. At this point, I would say I’m positive they’re right about the decline.

However, for the shape of the recovery, I’m not so sure. Some of the commentary I’ve seen suggests it is certainly possible to have a sharp recovery as personal consumption resumes. I’m pretty confident we will makeup some of the purchases that were delayed. I also believe we will soon go back to our favorite restaurant, but are we likely to order two meals to make up for the one we missed?

I certainly hope this very “V” shaped recovery is the probable outcome. But, the stock market will likely be our early predictor of what the data will ultimately tell us.

Time will tell the story. In the meantime, stay safe and stay well!