Why am I confident in a rapid recovery?
Facts are hard to come by during periods of crisis. Based upon my independent research and a little common sense, I believe the recovery will come much sooner and better than many expect. Here's why:
Most countries have instituted a form of "lock-down" and limited travel. For the most part, people are taking "social distancing" serious. Assuming they are, the spread of the virus should be slowing. If the incubation period, according to CDC, is between 5 - 14 days, we should know soon who and how many are infected. Let's get them isolated and healed. For those that are not infected, there will be pent up demand to restart rapidly.
The virus numbers will get worse before they get better because we have more testing kits available. Once we know what the real numbers are, we will adjust medical supplies and treatment to meet the demand.
The worldwide community is working together to rapidly find medicine that will properly treat the symptoms. There may not be a vaccine yet but the combination of treatment and distancing should flatten the curve much more rapidly in the days and weeks to come.
The price of oil today is artificially low and not sustainable for long. Saudi Arabia and Russia are playing a very dangerous game of chicken. The short-term impact is felt hard by U.S. producers (especially shale). However, the U.S. economy is resilient and our culture of innovation says we will find a way to thrive at lower prices over the long-term. S.A. and Russia kicked the hornets nest on this one. We may be stung a little but expect a rapid comeback.
Small business and consumer spending is the backbone of this country. The stimulus will help as most will spend the money on more than food/water/rent. This will kick start businesses in the U.S. while also reviving the worldwide suppliers (i.e. China) to do the same.
The banking system is stronger today due to the reforms resulting from the financial crisis of 2008. We may see some fallout but limited up to this point. Hence, funds can be made available.
We were expecting a mild recession in late 2020 or early 2021 followed by more growth. The market and economic impact have been accelerated and further declines may no longer be necessary. (I realize there will be industries affected longer and possibly decline into recession independent of the economy as a whole)
There are a lot of healthy balance sheets out there with strong cash reserves. Expect to see a lot of bargain buying very soon.
Okay. So what are the concerns? Here are a few:
When the Feds dropped the interest rate to 0%, it shot a big load and used up a large part of the arsenal. They have more bullets but this was a big one that had limited effect. If they have to buy very large amounts of paper and use up more bullets, well, not good.
As bad as our national debt is already, many countries are worse. We need a global recovery when many countries were already overly extended. Top economies will need to fuel the recovery and help others. Unfortunately, the world does not always work that way.
If the virus mutates, that could extend the medical recovery and cause more problems.
We could go on for days ....
So why the confidence in a more rapid recovery considering all the gloom and doom? The impact to the worldwide economy was artificial and extremely fast. I believe the pent up demand, enormous cash infusion, and innovative culture by American consumers and businesses will lead a rapid recovery worldwide.
If you'd like to discuss further, contact me at www.richhallgroup.com/contact