Displaying items by tag: recovery

(New York)

The long sought V-shaped recovery has been like a white elephant for investors. It has been hoped for since March when the economy started to shrink, but in the last couple months, most let go of the hope as the depth of the downturn became clear. However, given recent economic data, there are growing odds that the economy might vault out of its recession like a rocket ship. Morgan Stanley says it won’t be long until investors completely buy into that narrative. MS thinks in the next six months investors will go from “doubting to believing” in the v-shaped recovery, and that by the end of the year risk assets will be in a “mid-stage bull market mind-set”.

FINSUM: This is highly speculative, but it is a clear un-muddled position. We suspect the recovery is going to be slower than v-shaped, so our expectations are not nearly so bullish.

(Washington)

Markets are having a tough time right now on news of surging cases across many parts of the US. In what has become a typical cycle, optimism on the recovery is being tempered by media reports of surging COVID cases in several states. The markets seem to be unusually wounded this morning, and the reason might be comments from Coronavirus Task Force chief Anthony Fauci. Speaking about the rise in cases, he called it a “disturbing surge” and warned congress that the virus was not under control.

FINSUM: The rise in cases in Florida, Texas, California, and Arizona has been alarming, especially in the last week, so markets are starting to worry about the potential for new lockdowns.

(New York)

Morgan Stanley made a bold call this week. Their research team has officially adopted what seems like a fairly risky position on the economic recovery: they are saying it will be of the much sought after v-shape. The bank has been calling for a short and sharp recession for some time, but this is the most optimistic outlook they have published. According to Morgan Stanley’s chief economist, “Recent upside surprises in the incoming growth data and policy action have increased our confidence that this will be a deep V-shaped recession”.

FINSUM: We still don’t think this is going to be a v-shaped recovery. More like a U-shape or more likely a Nike swoosh shape. The depth of firings combined with the probable corresponding slow pace of consumer spending will hold back the pace of the recovery.

(New York)

The public and the media are flabbergasted at how the US stock market has seemed to defy everything we are seeing in “real life”. As of Friday, however, things started to make a little more sense because of good job numbers. Given the general disconnect between markets and the economy, it is important to take a step back and digest what markets really seem to be saying. In our view, the message is clear: not only is the economy going to bounce back, but a year from now, things are going to be better than they were before COVID.

FINSUM: The markets are making a very bold call and essentially pricing for perfection. However, it might not be that unrealistic. If the Fed and the government remain very accommodative, it is not outside the realm of possibility that by the end of June 2021, the economy is larger and potentially healthier than in Feb 2020.

(Washington)

Fed chief Powell made an interesting warning today. Powell said it will probably take a vaccine to get the economy into a full recovery. “For the economy to fully recover, people will have to be fully confident. And that may have to await the arrival of a vaccine … it may take a while . . . it could stretch through the end of next year, we really don’t know”, he said. Despite the hesitancy, the Fed has been very supportive in its statements of the support it will provide, saying the central bank could do a much more to help the recovery if needed.

FINSUM: This statement is really helping markets today, as combined with good news on a promising new treatment and the lack of a second wave forming (yet), things are looking up.