- Deutsche Bank says we will not see a V-shaped recovery in the economy or the stock market.
- The bank highlighted behavioral shifts that will dampen growth in the coming months.
- Even as coronavirus cases slow, we cannot simply turn the economy back on.
Deutsche Bank has slammed any hopes of a quick bounce back in the wake of coronavirus lockdowns. Analysts hoped the stock market would recover in a short-and-sharp V-shaped pattern after plunging 300% in a matter of weeks .
Instead, it’s clear this is a long -term crisis. The pandemic and its economic lockdowns will change everything. Deutsche Bank has already predicted a deep recession . Now they’ve released ‘behavioral changes’ that will cause slow growth for months and months to come.
Behavioral changes are the reason why we will not get a V-shaped recovery, and there is not much fiscal policy can do about it.
Households will squash consumer activity
We all know that consumer confidence and spending is the backbone of the US economy . That’s all about to change. The first eight of Deutsche Bank’s points are all related to household behavior. 1. Families will start saving more
. Just like the Great Depression, families will go into survival mode, saving any spare penny and avoiding unnecessary expenses.
2. Spaced out seating in public places . This virus will change our public spaces. Restaurants, cinemas, planes, and sports events will increase spaces between seats, forcing lower revenues.
3. People aren’t going on holiday
. Fewer share buybacks . Companies purchasing their own stocks were the biggest buyers on the market. That buying pressure will disappear
. Health insurance costs rise . Companies will pay more to provide cover for their employees.
Government regulation will slow stock market growth
And, of course, the heavy hand of the government will slow down productivity with over-zealous regulation. Deutsche Bank pinpoints a few notable shifts in the pipeline.
. travel restrictions . Some restrictions will stay in place, resulting in longer travel times.
. Increased regulation for retirement homes . . Decreased globalization . Nations are more likely to stockpile their own reserves and become less dependent on others. This may dampen global trade.
. More planning and preparedness . A welcome change, but may divert attention and resources from other sectors.
310. More supply of government bonds . A debt crisis was a concern before the coronavirus pandemic. With unprecedented levels of stimulus, it’s now a much bigger reality.
These behavioral shifts combine to slow down the economy and squash spending habits. No doubt, the economy and the stock market will recover from this crisis. But it will not be swift.
(This article was edited by ) Now Watch: CCN TV
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