But that recovery could prove to be a bumpy ride. Here’s why.
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The numbers are staggering, and the impact of the coronavirus crisis on the economy has been swift and severe as to be almost unquantifiable.
“You could see a fairly rapid recovery,” Dimon said at a virtual conference hosted by Deutsche Bank. “The government has been pretty responsive, the Federal Reserve has been very responsive. Large companies have a huge wherewithal, hopefully we’ll keep the small ones alive long enough hat most of them get back into business.”
As part of its efforts, the Federal Reserve has cut interest rates to zero, pumped trillions of dollars into the economy, and announced plans for nine emergency lending programs, including aid for small businesses.
Dimon argues that the Fed did the right thing in acting as quickly as it did with “increasingly strong actions.”
“This wasn’t the bazooka,” Dimon continued. “The Fed took out the whole military and applied it. Just announcing these programs reduced spreads in the market. It’s going to save a lot of small businesses, [and it’s] helping people avoid stress.”
Congress also passed an unprecedented relief package that included direct payments to individuals, expanded unemployment benefits, $350 billion in aid to small businesses, $500 billion in loans and other assistance for corporations, and $150 billion for hospitals and other healthcare providers for equipment and supplies. And they’re beginning work on another possible round of stimulus in the wake of the coronavirus crisis.
As states begin to ease restrictions are reopen parts of their economies, “you’re already seeing the positive effects of the opening-up taking place, at least for the economy,” Dimon said.
And Dimon isn’t alone. Keith Lerner, chief market strategist at Truist/SunTrust Advisory Services, postulated this week that we could be in the midst of the “shortest recession in history.”
“The market tends to bottom about four to five months before a recession is over, so, we might have the sharpest and shortest recession in history,” Lerner said. “Our base case for some time has been that we would start to stabilize in the economy in the summer, and it’s actually happening a little bit beforehand.”
But even as the economy begins to recover, Goldman Sachs warns that we could be in for a bumpy ride.
“The biggest risk we all face is the economy trajectory,” said Goldman President John Waldron said this week at a virtual conference hosted by AllianceBernstein Holding. “The risks ahead are that it doesn’t go quite that smoothly, and you have re-emergence of the virus maybe in pockets, you have uneven start-and-stop kind of feeling.”
Waldron sees a possible W-shaped recovery, which could pose a unique challenge for consumers, especially if government relief support wanes. If that happens, it would lead to “a lot more destruction” in consumer credit, according to Waldron.
Dimon too warned that the crisis could drag on for longer and that a prolonged economic downturn is still a possibility if subsequent waves of coronavirus outbreaks hit the economy.
“If it does go on for a year,” while the world awaits a vaccine, “it won’t be very good,” Dimon said. “You can’t prop up the stock market forever.”
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