What Will a Post-COVID-19 Economy Look Like?
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April 24, 2020
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Yes, it is way too soon to be discussing the condition of our economy in a post-COVID-19 world, just as the pandemic appears to be peaking in some locales, but be assured that these conversations already are taking place in C-suites and boardrooms across the country.
As the speed and intensity of the unfolding contraction become more evident each week, we are confounded by those economists and other experts who continue to opine that the U.S. economy will experience a sharp or V-shaped recovery. However, their numbers have declined in recent weeks. Such optimism is either blatant cheerleading, wishful thinking or deep denial about facts on the ground.
Judging by the fierce rally in equity markets since the lows of late March, investors continue to place unwavering faith in the Fed’s determination to save financial markets from their excesses and mitigate an economic downturn that has only just begun — or, at the least, to encourage the inflation of financial asset prices irrespective of rapidly deteriorating fundamentals.
Some sectors of the economy may bounce back quickly once the pandemic crests and stay-at-home orders are lifted, especially from the pent-up demand of postponed orders of hard goods that begin to come through in the back half of the year. However, many industries cannot make up lost business due to COVID-19. For instance, nobody will get three haircuts monthly or rent a car every weekend for a few months to make up for their downtime during stay-in-place orders. That business activity is irretrievably lost, and the best hope for these companies is an eventual resumption of normal pre-COVID-19 demand.
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April 24, 2020
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Global Co-Leader of Corporate Finance & Restructuring