It’s been months since most of us, myself included, have shuttered the office and started working from home. Like many, I’m feeling the strain of upended life.
How about you? Are you ready to venture out again?
In this post, I thought I’d provide a rundown of some of the latest economic projections as well as a sneak peek of what post-lockdown life could look like for us soon. (I know, I know. I am ready for a break from COVID-19 too. No worries. Scroll down to the end for some wonderful distractions.)
On to the economy.
You may have seen a headline showing that U.S. economic growth dropped -4.8% in the first quarter after posting 2.1% growth in Q4 2019. That’s not a surprise.
Unfortunately, worse news is ahead since widespread layoffs and shutdowns didn’t hit until late March. Here’s a projection of what the next few quarters could look like for the economy.
Gross Domestic Product (GDP) is the monetary value of all finished goods and services made during a specific period. GDP is often used to measure the economy, it’s growth rate, and how much consumption is being done.
You can see in this chart above that the coronavirus hit the economy like a tsunami. Q2 could be the worst quarter since the Great Depression.
The arithmetic of recovering from a 30%+ drop in economic growth means that it could take many months (maybe even years) to return to pre-pandemic GDP levels, especially if we face multiple waves of infection.
Let’s mentally prepare for that.
Interestingly enough, April 2020 was one of the worst months for the economy in history. On the flip side, it was also a blockbuster month for stocks.
Why are stocks so disconnected from the economic data?
Fundamentally, a stock’s price is an attempt to put a value on the underlying company’s earnings now and in the future. Complicating the calculation are factors like fear, greed, uncertainty, and movements in the overall market.
While economic data looks back at what has already happened, the stock market looks forward. It’s looking at the trajectory of the business environment. Framed that way, the rally isn’t so unusual since the market is expecting things to get better, not worse.
Will the rally continue? Hard to say. Volatility is very likely to be the name of the game for months. We could very well see large up days, as well as large down days. The market could end up trending sideways for a bit.
Economists are predicting a rebound in Q3 2020. Are they right?
You know by now that we can’t perfectly predict what the recovery will look like; all economic estimates are based on educated guesses about spending, business investment, trade, and other factors. The biggest unknown is “personal consumption” by folks like you and me. Our spending drives 70% of economic growth.
The pace of the recovery depends on how quickly businesses reopen and consumers go out to shop, eat, travel, and spend money. If people don’t feel safe going out or don’t feel confident enough to open their wallets, growth could take longer to come back.
What could life look like as your state reopens?
While America is just now taking the first tentative steps toward reopening, many countries around the world are farther along, offering us a glimpse of what daily life might look like in a world where the coronavirus still remains a threat.
Hong Kong: Restaurants are open but tables must be spaced farther apart.
South Korea: Pro sports are back but athletes play to empty stadiums. Temperature screening is in place in many buildings.
Taiwan: Schools are in session but assemblies are canceled and students wear face masks in class.
Australia: Beaches are open but sunbathing, picnicking, and large gatherings are forbidden.
How long will coronavirus precautions overshadow our daily life? Realistically, some restrictions are likely to drag on until a vaccine or breakthrough treatment becomes widely available.
It’s believed that we can learn a lot about someone by their handshake – but will we start greeting people with a pound or an air kiss? Will “social distancing” become the norm, or will it be phased out? Surely we’ll see sanitary wipes and hand sanitizer at every turn in airports and other public facilities.
I envision going to a restaurant and being sat, but no one is allowed to sit at the surrounding tables. The wait staff might be gloved and masked, after being temperature-checked to start their shift. I look over and there are no more stools at the bar; patrons walk up, order, and walk away with their order.
Technology trends that were already in place pre-crisis, will probably continue to accelerate. I personally have been active in video conferencing for years, and we’ll see much more of that. Same for remote/flexible working, and adoption of using the cloud.
What do you think? What will our “new normal” look like? Let me know – I am curious to hear your perspectives.
To end on a happy note, here are some distractions from the coronavirus:
Enjoy (and hang in there)!
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