If you listen to the President during his virus updates, he talks about a V shaped recovery or a bounce back to what the economy was. He is hopeful, optimistic and is a cheerleader, but is it realistic? At the moment, no one knows but the expectations are it will not be a V shaped recovery. The first problem is when the closed shops are opened, will there be a rush to get in? Likely not as seen what is happening in China.
In an article by Reuters staff in China, the central bank slashed borrowing costs to stimulate the borrowing of money and people to start buying anything.
The GDP in China fell 6.5%, which is the first quarterly decline in 30 years for the world’s second largest economy. Will the largest economy, the US be that much different than the 2nd largest?
Japan based Nomura analysts noted unlike previous easing cycles, when most of the new credit went to finance spending on infrastructure, property and consumer durable goods, this we expect most of the new relief to help enterprises, banks and households survive the COVID crisis. (companies and people are trying to pay back bills).
One might expect in a service economy, the government almost has to give a monthly income for 3 months, before spending resumes the normal.
Linking to dividend paying stocks, if you own these stocks you are optimistic, the economy will be better however the economy will have and continuous to change. Start with your expectations and then move to bigger circles to determine what will get the economy back to normal? If those do not exist, what companies are doing well and continue to do well?
There are more questions than answers, til the next time – to raising questions.