— Sam Potter (@SamJPotter) April 1, 2020
Good memo from Howard Marks:
“.. assets were priced fairly on Friday for the optimistic case but didn’t give enough scope for the possibility of worsening news. Thus my reaction to all the above is to expect asset prices to decline.” t.co/AQHKmI5VZB
— Carl Quintanilla (@carlquintanilla) April 1, 2020
Economists Are Losing Hope in a ‘V-Shaped’ Post-Virus Recovery
The coronavirus is guaranteed to throw the world into recession, but economists are becoming less convinced about the potential for a strong snapback in growth.
The base case for forecasters is that a recovery, perhaps even a vigorous one, gets under way in the second half of 2020. But as the pandemic spreads through Europe and the Americas, and the wide range of knock-on effects comes into clearer view, caveats to that call are piling up.
relates to Economists Are Losing Hope in a ‘V-Shaped’ Post-Virus Recovery Underlying all of them is the simple fact that economic outcomes hinge on something that’s beyond the professional competence of most economists to forecast: the trajectory of the disease itself.
“We have no certainty the virus will be gone by the end of the second quarter,” said Nobel prizewinner Joseph Stiglitz, a professor at Columbia University in New York. If it “lasts through the summer, then all the effects will be amplified.”
Read More: Economists See U.S. Facing Worst-Ever Quarterly Contraction
Beyond that, there is an array of questions for economists to grapple with — and those doubts increasingly undermine projections for what’s known as a “V-shaped recovery,” in which lost output is quickly restored.
Rather than sounding a decisive “all clear,” health authorities seem likely to advocate a gradual return to normal working life, so the behavior known as “social distancing” may stick around.
Along with financial blows sustained during the downturn, that is likely to damp spending on travel or spending at shops or restaurants — assuming those businesses can stay afloat in the first place.
“It takes more time to get ‘back to play’ than to ‘get back to work’,” said Catherine Mann, chief economist at Citigroup Inc. This “underpins concerns for the trajectory for services-dependent advanced economies in the second half of 2020,” she said.
Global Easing in 2020 Central banks across the world have cut interest rates this year
Note: Map shows rate decisions since the start of the year
Consumer caution is already evident in China, even though authorities say it’s safe to go back into the marketplace, and it could happen elsewhere.
That’s why Mark Zandi, chief economist at Moody’s Analytics, likens his forecast to a “Nike swoosh” rather than a V- or U-shaped rebound. He says U.S. output alone could plunge at an annualized pace of as much as 25% in the second quarter, bounce back by up to 15% in the third, then stall in the fourth with the economy “basically limping along.”
JPMorgan Asset Management Says It’s Too Early to Buy Stocks
In a walkback from their earlier statement only two days ago, JPMorgan’s strategist says that it’s too early to buy stocks yet.
“I’m not yet confident in advocating overweight risk assets positions because you’re vulnerable in that scenario to a deterioration of the news on the medical front,” said Hugh Gimber, a global market strategist at JPMorgan Asset Management, in a phone interview. “The policy measures have helped but they’re not on their own enough for us to call a definitive bottom in this market.”
Two days ago, JPMorgan said that the worst of the market routs was probably over:
Conditions that JPMorgan had set for market stabilization and revival have largely been met, with recession-like pricing, a reversal in investor positioning and extraordinary fiscal stimulus, strategists led by John Normand wrote in a note Friday. Coronavirus infection rates remain a “wild card,” as they’re still high.
A range through which you can drive a Mack truck. A complete lack of clarity on this first day of the second quarter.
— Danielle DiMartino Booth (@DiMartinoBooth) April 1, 2020
— M/I_Investments (@MI_Investments) April 1, 2020
— Sam Ro 📉 (@SamRo) April 1, 2020
— Joe Rennison (@JARennison) April 1, 2020
"Unfortunately it is still more of a down cycle market from here," says @elerianm. "We haven't seen this sort of shock before…so cognitively it is taking us time to appreciate." pic.twitter.com/dxwcvrrS0X
— Squawk Box (@SquawkCNBC) April 1, 2020
Gundlach said earlier this month that there’s a 90% chance the United States will enter a recession before the year is over due to the coronavirus pandemic.
- DoubleLine Capital CEO Jeffrey Gundlach said the market low reached last week will get taken out before a more “enduring” bottom.
- “The market has really made it back to a resistance zone and the market continues to act somewhat dysfunctionally in my opinion,” Gundlach said. “Take out the low of March and then we’ll get a more enduring low.”
- The S&P 500 tumbled into a bear market at the fastest pace ever as the coronavirus pandemic caused unprecedented economic uncertainty.
- The equity benchmark hit a three-year closing low of 2,237.40 on March 23, more than 30% from its record high reached in February.