Hoping for a V-Shaped Recovery

In economics a V-shaped recovery is broadly defined by a sharp decline in output, employment or any other metric measuring the health of the economy followed by a quick and sustained recovery. It is different from an L-shaped recovery, in which the economy slumps for a longer period of time or, among others, a W-shaped recovery, which is characterized by, you guessed it, a brief recovery followed by another steep downturn and a second swift recovery.

A V-shaped recovery is what economists are hoping for in the current crisis, brought about by the coronavirus pandemic. Trying to contain the spread of COVID-19, countless countries around the world took drastic measures, resulting in a sudden drop of economic activity. Businesses operating in the travel, tourism and leisure sector lost their entire income stream practically overnight as strict social distancing rules were put in place, forcing airlines to ground their fleets, hotels to close doors and restaurants to pivot to takeaway service. But since the current crisis was brought on by an exogenous shock, many are hoping that the recovery will be just as swift as the downturn itself, once the outbreak is under control or a vaccine is found.

The World Bank cautiously backed such hopes with its Global Economic Prospects report, published on Monday. Assuming that “the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and a bit later in emerging markets and developing economies, that adverse global spillovers ease during the second half of the year, and that dislocations in financial markets are not long-lasting" the World Bank expects global growth to rebound to 4.2 percent in 2021. The reports also notes that any near-term projections are subject to an unusual degree of uncertainty, however, warning that an alternative scenario sees the world economy shrink by 8 percent this year, followed by a sluggish recovery of just 1 percent in 2021.

My comments:
Let’s not ignore that the chart below is most likely an optimistic scenario
Many things can still happen – like a fall return
But – I’m now looking at COIVD as a virus where the primary objective is containing exposure or “viral load” – many of us may have already had some exposure but the levels have been so low we’ve been asymptomatic. Low exposure may be a good thing as it allows the body to slowly develop antibodies??

I think this thing is manageable if everyone is mindful of social distancing / limiting exposure.
Guessing this thing will churn on for another year but I cannot see how it’s worth heavy-handed measures anymore – we know enough – we have to work through it – one way or another
To the greatest extent possible – if people can be productive from home, they should be allowed to – as a permanent new approach. It can cut costs as well.

Finally – IF the US economy shrinks by 6% in 2020, 4% growth in 2021 doesn’t get you back to 2019 levels – that would require about a 6.5% rebound in 2021 (highly unlikely)
Also – to get 2021 back to where it would have been with ongoing YOY 2% GDP growth – 2021 growth would have to come in at a sizzling 11% – yikes!

This event has set us back considerably – and put consumers, businesses and government deeper in debt – the debt hole will become unmanageable in do many ways – state retirement plans were already in deep shit – they’ve been effectively blown up.

The fed will continue to buy securities – we end up with a zombie economy

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Nobody knows – chart above said US economy will decline 6%
Below says 7%
And the caveat is – SINGLE COVID hit – no fall resurgence …

Hoping for a strong recovery. The stock market is so detached from the average American right now and doesn’t accurately reflect the massive amount of job loss that has occurred, and that’s worrisome for the future.

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It’s fake!

Housing market could get interesting in the next quarter or two. There definitely is some peril there IMO.

All real estate really – street storefronts are dominated by small businesses / restaurants
A jump in empty storefronts??

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Depends where you are. Generally? Yes.

West MI? RE is still blazing hot.

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Daughter just bought a home here on the east side of the state. The 100 - 200k market in Genesee County is ridiculous, especially in that 100-150 range. Definitely a seller’s market.

The wife and I have thought about downsizing, but at the prices we’re seeing, it makes no sense. The top of the market is deflating, the bottom of the market is inflating… That’d be selling low and buying high for us. No-go.

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Gads … that’s not the way it’s supposed to go
But I guess too many people bought too much house

Actually, it’s mostly the lack of land to build new big subs, at least in GR is Reason #1, #2 is that builders won’t do a new build under 300k, not able to make a profit #3 is the Lowest Rates Ever. #4 is all the immigration to west MI for lifestyle and jobs growth. Perfect sellers market.

Just think if all the 22-30s weren’t fucked by Student Loan debt blowing upnyheir ratios and disqualifying a purchase.

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Not that simple, unfortunately.
image
The clip is the change by percentage of our State Equalized Value.
The most recent year is at the top, 2018.
The bottom number was the 1st year our SEV was adjusted downward, 2009. (reflecting the crash in 2008)
So, 2009 and 2011 show significant losses in value due to many houses being sold by mortgage companies for any amount they could get. We’ve been in a steady, but SLOW recovery. In fact, the State Equalized Value of my current house is still about 11% lower than it was in 2007. We ~were~ nearing a return to 13 year-old values.

Don’t you expect your house value to decline again?
This COVID event will be worse than 2008 I think?

I really don’t. It is going to be market by market and many, possibly most will see some turbulence. This market where I am is really robust.

I doubt we’re looking at a 2008 crash again, but I do expect the 2021 assessment will be negative. At least here in hobby farm / horse country.

Banks were doing 125% LTV mortgages leading up to that crash. The bail-out put money directly in the pockets of the banks. There was no incentive to work with the troubled home-owner. Homeowners walked away, banks repo’d and then sold for whatever they could get. Property values tumbled due to the mortgage sell-offs. There was a period of at least two years here where the only comps for appraisals were bank sales. Those variables, including where the bailout money went, are not in play this time.

This is a steep drop in economic activity and it will be prolonged
I expect cascading debt defaults and bankruptcies to make headlines for the next 12 months at least
I hope I’m wrong but this is very early into this thing — things will start breaking

They are literally going to print to infinity.

Nothing is getting paid off, USGOV debt wise. Ever.

It makes.my whole being clench up to say it after 40 years of paying g attention to this from a somewhat educated POV, economically… but that’s the truth.

There isn’t another answer, and I absolutely loathe speaking in absolutes.

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I know
It’s already insane — it’s been insane for a long time
I put the blame for where we are today on that asshole Greenspan and every fucking Fed Chair since — and of course every lying Politician and President since … I suppose Clinton
I know you could probably go back to FDR if you wanted to
Republican / Democratic— both parties have been trash forever
I cannot understand why this thing hasn’t imploded yet
Japan? WTF?
You are not alone pup

This is Not Capialism

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When you have a few minutes…
https://goldstandardinstitute.net/category/authors/dr-edwin-vieira/

Hoping everyone begins to let it sink in that “Covid” is a cold.
You’ve been had.
“It’s easier to fool a fool than to convince them they’ve been fooled.”