What the corona virus economic recovery looks like dictates how soon life returns to normal, and what normal is. Economists often use “recession shapes” 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 my ongoing efforts to keep you up-to-date on how the coronavirus is affecting your investments, I 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…
As long-term investors, the long-term health of the economy plays an important role in how we plan for the future. Despite this, we must always remember that he economy and the markets are not the same. They are related, but they don’t move in lockstep. More often, the markets move ahead of the economy. Investors are always looking towards the future, trying to gauge where the economy will go, as opposed to where it is now.