Next 45 days 'most critical' for US economy, says Wall Street expert who predicted 2008 recession
As leaderships at both federal and state levels continue to debate over reopening the country in the wake of the coronavirus pandemic, economic experts feel the timing will be extremely crucial to determine the country’s future.
At least 22 million Americans have lost their jobs in the economic downturn caused by the widespread lockdown in a bid to contain the spread of the deadly virus that has killed over 40,000 people in the country so far.
Acclaimed Wall Street expert Alan B Lancz said in a newsletter last Wednesday, April 15, that the next 45 days may just become the most critical period in America’s financial history.
“While on average we may face a bear market every 10 years, this one is like no other,” Lancz, a disciple of famous investor Sir John Templeton, said, reported MarketWatch.
'A U-shaped recovery rather than a V-shaped one'
Lancz, who runs an investment advisory firm in Toledo, Ohio, said even if the best happens with the economic recovery, the result will be a U-shaped and not a V-shaped one where a rebound in business and consumer activities from the pre-crisis levels will be time-taking.
“Even if we execute properly, the recovery will take time and a best-case scenario is a ‘U’-shaped recovery. The much talked about ‘V’-shaped recovery is no longer in the equation because of the unprecedented combination of negatives with this crisis,” the financial expert said on the chances of a fast and sharp recovery from the current low.
The New York Empire State Index fell to a record low of minus 78.2 in April from minus 21.5 in March. The US industrial production fell 5.4% in March -- the steepest fall since 1946 -- while the retail sales in March witnessed a 8.7% slip. Also, the confidence among America’s home builders also plummeted in April to its lowest reading since 2012.
President Donald Trump has been eager to reopen the economy for the steady slip makes him wary over the upcoming election in November. He has also cautioned that because of a prolonged lockdown, people could go into depression and even commit suicide.
He had thought about reopening by the time of Easter but had to backtrack. Now, he is talking about a May 1 deadline and also laid out a plan for a three-phase reopening. As he confronted the governors over the reopening, he asked the people to ‘liberate’ some of the states that saw people coming out in the streets last Friday, April 17, demanding from the state leaderships to reopen the economy as their economic hardships have only increased.
Industry leaders, however, told Trump during a recent advisory call that the coronavirus testing needed to be increased significantly before the move is made to reopen the economy.
Political polarization has continued despite the crisis situation. While Trump has said a part of the country has gradually started returning to normal, some states have alleged that their response to the pandemic has been obstructed by an inadequate federal response.
Lancz, who had profited both in the 1987 and 2008 crises, asked the investors to be cautious about a crisis that he has not seen in his career. While in 2007, Lancz asked the clients to sell before the market worsened, he sidestepped the crash in 1987 as well when the Down experienced a 22% fall in a season.