Economists Be Cuttin’ Shapes
It’s a funny old business! From quick V-shaped rebounds to ugly W-double bottoms, award-winning economists are going back and forth on what chart patterns they think we’ll see when the stock market recovers. Predict the e-con-omy. It’s easy as A-B-C!
The steep V-shaped bounce back is what got all of this started, a widespread belief that pent up demand will explode when medics give investors the “all clear”. Perhaps it will, but the underlying economy might struggle to reboot with the click of a finger.
Balance sheets will be in need of repair, and many raw materials producers have let workers go amid corona. They’ve shut down the power and locked the gates. Offline! It will take security checks, careful planning, and lots of paperwork to put thousands back to work, so take heed; the longer you’re out, the longer it takes to get back in!
That’s why the “Nike Swoosh” shape has Aiden Donnelly’s vote, head of equities at Ireland’s largest investment house. “Don’t try and be too clever,” he says. “The money is going to come back slowly into quality names.” He mentioned Nike, Salesforce.com, and Caterpillar – all Invstr community favorites.
The W-shaped double bottom suggests another painful round of selling. Investors make the most money in North America, which means market players now have the virus on their doorstep. That could allow it to hit home, as might gross domestic product growth for this quarter.
Goldman Sachs made a surreal speculation yesterday, suggesting an L-shaped pattern from current levels. That’s not what we want to hear, accompanied with -34% gross domestic product (GDP) growth forecasts and fifteen percent unemployment.
There are few epidemiological cross-economists out there, so take these projections and predictions with a pinch of salt and keep an open mind. Either stocks soar, or they plummet further into your buy zone. Heads you win, tails they lose!