Everyone you and I have ever met has been affected by the coronavirus.
My neighbors in Agoura Hills, and friends and family in New York, Florida, Brazil, England, Germany, Italy, Australia and Israel.
It's likely that every human on the planet has been affected by COVID-19.
We have not had a global pandemic of this magnitude since the 1918 Influenza scourge swept our world during the waning years of World War 1. At that time the ventilator had not yet been invented, and the Influenza Virus itself had not yet been discovered. Our current pandemic is encountering a world that can not only identify the virus in all its intimate strengths and vulnerabilities, but also possesses effective tools and strategies to mount a successful unified defense.
Though it's sad that it took a disease to bring us together, it reminds me of how deeply connected we all are and how much our daily existence depends not just on our community, but on people we'll never meet in far-flung corners of the world.
That very interconnectedness is what's making this pandemic so dangerous, and the battle so costly to us and the economy.
Economists believe we entered a recession in March, and the latest data continues to show the economic damage:1
- Retail sales dropped 8.7%, the biggest drop since the government started tracking the data in 1992.2
- Spending on travel, restaurants, and shopping overall is way down (though grocery sales and delivery are up).3
- The number of new unemployment claims skyrocketed to 22 million, erasing the job gains since June 2009.4
Despite the ugly economic data, stocks just wrapped their best performance in decades.5 What gives?
"Irrational exuberance," to quote Alan Greenspan. Stocks are famous for rallying in the face of bad numbers, and it's clear that investors are expecting government stimulus to lead to a quick recovery as states emerge from lockdown and business picks up.
Are bullish investors right? Will the economy recover quickly?
It's impossible to say right now. How long the downturn lasts and how soon the economy recovers depend on answers to some critical questions:
- When will widespread testing, tracing, and treatment allow lockdowns to ease? While reopening America too soon may ignite a fresh wave of the pandemic prolonging the pain, waiting too long may escalate the anxiety and economic suffering beyond what is necessary.
- Will employers maintain relationships with their emplyees? You can't just flip a switch and reopen a closed business without skilled workers. The longer the shutdowns continue, the harder it will be for companies to staff up.
- How soon will consumer spending return? Pent-up demand that's just waiting for restrictions to ease could cause spending to surge. While some demand may not come back and could cause spending to remain depressed for longer. Here's a simple example: pent-up demand would be rescheduling a canceled vacation, while destroyed demand would be deciding to skip it entirely.
V, W, L, or Swoosh?
The "shape" of the eventual recovery is being hotly debated because it gives us insight into what would need to happen (and how long it could take).6
"V-Shaped" Recovery: A short, sharp decline and then a quick rebound is the best-case scenario. In this case, lockdowns lift soon and spending surges, driven by pent-up demand and government stimulus.
"W-Shaped" Recovery: A "double-dip recession" is a worst-case scenario that could happen if the easing of restrictions leads to another wave of infections and lockdowns, or the economic damage causes a second downturn.
"L-Shaped" Recovery: An L represents a sudden plunge and fitful recovery if lockdowns continue through the year and growth is slow to return.
"Swoosh-Shaped" Recovery: A tick or swoosh is a sharp downturn followed by a gradual recovery as lockdowns are eased cautiously across the country.
We can't predict what the road ahead will hold, but I think it'll look less like a return to "normal" and more like a way to live with the way COVID-19 has overturned ordinary life.
What do you think? Will your life be back to normal this summer?
Hit "reply" and let me know.
P.S. Now that stimulus money is going out, the scam artists are slithering out to get their piece. Here's what you need to know:
- Scammers are impersonating the IRS and contacting folks by mail, email, phone, and text to ask for personal information.
- The IRS is not contacting taxpayers about stimulus checks. If you receive a call from someone asking for information, hang up. Do not click links in emails or text messages purporting to be from the IRS or the Treasury Department. If someone asks you to pay an upfront fee or to confirm your bank details to receive stimulus money, it's definitely a scam. Contact your bank or our office at (818) 483-6611 if you're not sure.
- Please share this information with those you love, especially parents, grandparents, and elders who may be at higher risk of being victimized.