What will the recovery look like? That’s the question every economist is asking. As we continue battling the coronavirus pandemic, the answer will dictate how soon life returns to normal – and what normal actually is.
Economists often use “recession shapes” – commonly taking the form of letters from the alphabet – as a way to characterize recessions and their recoveries. V, U, W, L… …modern history provides plenty of examples of each of these types of recoveries. But what will the post-coronavirus recovery look like?
Will it be V-shaped, with the economy bouncing back as swiftly as it fell? Or will it be more like the Nike swoosh – a swift drop, with a long but straight road back to the top? Or maybe it will be like a rollercoaster, with plenty of hills and valleys to traverse before the ride comes to a stop.
There are good arguments to be made for each scenario. That’s why, for the next several months at least, economists, investors, and analysts will all be looking anxiously at every bit of data they can find to determine which letter of the alphabet the recovery is most likely to resemble.
As part of our ongoing efforts to keep you up-to-date on how the coronavirus is affecting your investments, we have prepared this short booklet to briefly cover each scenario, why it may or may not happen, and how each could impact us. Before we begin, though, there’s one important thing to remember…
The markets and economy don’t always move the same way. The markets are forward-looking. They move based on expectation or the sudden appearance of unexpected events. The economy, meanwhile, measures our nation’s current wealth and resources.
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7/8/2020