What Does The Recovery Look Like?

By Susan Rupe

Will the financial recovery following the COVID-19 shutdown be V-shaped, U-shaped or W-shaped?

Dr. David Kelly said recovery will resemble neither of those letters.

“The recovery will look more like ‘plunge, bounce, crawl and resurge,’” he said. Kelly, chief global strategies for J.P. Morgan Asset Management, presented a webinar on “The Investment Implications Of COVID-19” for the Employee Benefit Research Institute.

Social distancing saved many lives from COVID-19 but led to a major slump in economic activity, Kelly said. He said that businesses and industries that were affected by COVID-19 could be categorized as “cans,” “can’ts” and “coulds.”

The “cans” are businesses that are able to conduct operations as usual while maintaining social distancing. The financial services industry is an example.

The “can’ts” are those that are unable to operate in the COVID-19 environment and probably won’t return to normalcy until a vaccine is discovered. Examples of “can’ts” include the travel industry, and sporting and entertainment venues.

The “coulds” are companies that had to shut down immediately because of the pandemic but could remain open with some social distancing protocols. Car dealers, real estate, manufacturing and construction are examples.

Kelly predicted that COVID-19 could affect the market for as long as two years, but he did not seem to be too concerned about the prospect of two years of down markets.

“It’s significant but not the end of the world,” he said. “Markets take the long-term view. Many of the industries that were shut down – such as the travel industry – employ a lot of people but are not represented in the stock market that much.”

The stock market “can see the end game for the current recession,” Kelly said. He added that low interest rates may be giving investors more incentive to funnel money into stocks.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.