- Barclays has downgraded its year-end price target for the S&P Index by a whopping (%.
- Dr. Anthony Fauci says the U.S. should see the “beginning of a turnaround soon,” but don’t expect economic activity to return to normal.
The bank isn’t discounting the possibility of an ‘L-shaped’ recovery as opposed to the ‘V-shaped’ rebound many economists are forecasting.
The Dow and broader US stock market were in rally mode on Wednesday, extending a swift rebound on hopes that the worst of the coronavirus crisis had passed. But Barclays says there’s more pain ahead for the stock market as the U.S. economy enters a painful recession followed by a slower recovery.
Barclays: Further Lows Eyed
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The bank on Wednesday slashed its year-end target for the S&P (to 2, (from 3, previously. As CNBC reported, Barclays is the most bearish of all Wall Street banks.
In a note to investors, Barclays’ leading derivatives strategist Maneesh Deshpande said :
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Equities have rallied significantly off their lows in late March as the growth rate of new infections continues to decline but estimates of economic damage are now worse than the 2020 [Global Financial Crisis].
The large-cap S&P (index bottomed at 2, in February, its
L-Shaped Recovery?
At the crux of Barclays’ bearish call is the expectation that the US economy will be slow to recover from the coronavirus crisis.
Rather than expecting a quick ‘V-shaped’ recovery, the bank is calling for a U- shaped ‘or’ L-shaped ‘path. The latter is characterized by a steep recession followed by a slow recovery that could take years to play out.
Many analysts see recession as a foregone conclusion as coronavirus
Although the economic impact of the novel pandemic is still playing out, it has already caused a
record surge in unemployment claims , a sharp drop in consumer confidence and a decline in manufacturing output. At its worst, coronavirus will drive (% unemployment in the United States, according to the Federal Reserve Bank of St. Louis . To be clear, Barclays’ analyst says a U-shaped recovery is more likely. The more dreaded L-shape has a 24% chance of materializing, according to Deshpande.
CNBC’s Jim Cramer is also calling for a more gradual recovery but appears to have ruled out the chance of a more prolonged recession. (Then again, Cramer’s the guy who urged President Trump to “print the darn money” (on national television in response to the COVID – 30 outbreak. His opinion needs to be taken with a grain of salt.)
COVID – Silver Lining? As the economic fallout from coronavirus continues to mount, Washington’s top virologist says the worst of the outbreak may be about to pass.
Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, recently told Fox News that while “it’s going to be a bad week for deaths,” the United States should see the “beginning of a turnaround.”
His views are largely consistent with the virus’ death rate, which is doubling at a slower pace than before.
As CCN.com reported earlier this week, the doubling time for COVID – deaths is slowing in at least ten states , including hardest hit areas like New York, New Jersey and Michigan.
despite cautious optimism, Fauci urged that existing lockdowns and social distancing measures need to be maintained . As of Wednesday, the United States had more than , confirmed infections.
Even if the infection rate were to die down completely, there’s no telling when normal economic activity will return. The outbreak is expected to leave a lasting mark on consumer-focused industries like retail, tourism, restaurants and events. Supply chains will also have to be re-worked, re-shaping America’s future significantly .
Even if the infection rate were to die down completely, there’s no telling when normal economic activity will return. The outbreak is expected to leave a lasting mark on consumer-focused industries like retail, tourism, restaurants and events. Supply chains will also have to be re-worked, re-shaping America’s future significantly .
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.
This article was edited by Josiah Wilmoth .
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