“The hardest-hit sectors will rebound quickest”— Paul Ebeling
Many of the world’s leading money managers, including our Shayne Heffernan PhD believe economies will not look different from their old selves after the epidemic passes, and are betting on a speedy recovery with little harm.
The hardest-hit sectors will rebound quickest.
Fuelling the optimism is the view that thanks to vast government support and central bank stimulus, consumers and businesses will emerge less damaged than in past recessions plus the vaccine.
When I study prior frames like this where epidemics/pandemics have impacted global regions, there tends to be a greater snapback or return to normal than many economists and pundits suggested.
There will not be radical change post this chaotic medical emergency, though employment levels will take time to fully recover.
Government job support programs and a the spike in savings rates as people stayed indoors mean consumers have more cash to splurge on services when economies fully reopen, the pent up demand is huge.
Yes, household income has risen during the instant recession, and while demand for services got hammered, spending on goods is also up 10% in Y 2020.
Shayne and I are betting on a rebound in the banking, leisure and tourism stocks that were hammered hardest in the February/March correction.
Lift the draconian restrictions and the world reverts to pre-virus conditions and not some new normal some pundits and the MSM like to talk about. Note: when the UK briefly lifted travel restrictions almost 2-M people booked flights to vacation in Spain last August. Plus, millions of people traveled by air, train and car for Thanksgiving despite fear mongering from Pols and government agencies.
Confidence among financial institutions about a strong recovery seen in the recent series of record highs stock market closes ignore unemployment rates and fears that a 2nd wave of COVID-19 this amazing V-shaped economic recover, there is no 2nd wave, COVID is over.
Over 100,000 US small businesses have shuttered in light of COVID through the Fall of this year, yet a new wave of business is being born at the fastest rate in over a decade in response to innovation and pent-up, refashioned demand which is the backbone of the US economy notes economist Bruce WD Barren.
Among Mr. Barren’s other conclusions, “expect to see an acceleration of productivity gains but at the cost of labor market growth; consolidation is likely in financials, retail, and some areas of technology; with corporate real estate footprints shifting from urban to suburban environments.”
After diving 30% + in February/March, global stocks have risen 60% to record highs and have picked up the record-long Bull run where they left off following the US’ lead.
Figure 1 illustrates the IMF’s latest growth outlook for Ys 2020 and 2021. Both emerging markets and advanced economies saw major hits to growth but are advancing in amazing V-shaped recoveries.
As economies rebound, money is made in buying industrial, leisure and housing companies and European and Asia-Pacific banks.
We are very optimistic about the emerging market economies, plus there will come inflation down the line.
As economist Bruce WD Barren notes, since 1950, the average recession has lasted less than a year, and never before has the US government dedicated so many resources to fighting a recession. The extraordinary action promised by the Fed and a possible 2nd round of stimulus could make 2021 “the best year for the economy in history” thanks to the foundation laid by President Trump.
Have a healthy weekend, Keep the Faith!