At the beginning of the pandemic recession, analysts were predicting a looooong recovery, but now experts are singing a v-shaped recovery?
As lockdown measures soften and more businesses start to reopen, market optimists are predicting that a v-shaped recovery could be more likely than some might believe. Companies are starting to report that once lockdowns are eased and demands rise back up again, they should see a steady influx of customers again, raising revenues back to what they were pre-pandemic. Some believe that US markets should be back and stronger than ever come 2021.
However, there are also very real threats that could disable the possibility of a v-shaped comeback. For instance, the Coronavirus could possibly see a second wave come wintertime, which would coincide with the flu season, possibly driving the economy down again just like the first wave. The rising tensions between the US and China recently also isn’t great news. However, economists are more optimistic now than at the start of the pandemic. In fact, the Bank of Canada just today morning announced that they were keeping the interest rate, signaling that they believed the economy had already weathered the harshest beating from the virus.
Consumers are starting to step outside now in Canada, as Toronto home sales have reportedly jumped 53% from April record lows, showing that consumers are starting to have more of an optimistic outlook too.
Back to the US. Jerome Powell, Fed chairman, has already emphasized added fiscal measures to be pumped into the US economy (v-shaped recovery, here we come!). Fed officials believe that there needs to be more public spending before we can be normal again. However, the controversy over negative interest rates is looking more like a conspiracy, as Powell has already stated his doubts with the move, and believes it could actually be detrimental to US banks.
So that’s what we’re working with. More fiscal stimulus and easing lockdown measures letting consumers walk outside and right to their nearest retailer, which will get the economy back on its legs, but the lingering possibility of a coronavirus take 2 is still worrisome amongst investors and is a reality that no amount of money can fix really (unless that money can make an instant cure).
As an investor looking at the situation, the best thing to do right now is invest if you still haven’t, as securities are still going for somewhat of a discount, and hold. We can’t predict when things will truly be normal, the virus situation seems just as volatile as the markets. However, past history has shown us that things will eventually rebound (*cough* 2008), just no one really knows exactly when and how long. Right now would be the time to buy and ride out into the sunset.
Any thoughts? Feel free to comment below