Although the stock market enjoyed its best week since 1974 with the S&P jumping 12.1%, mostly on news that the federal government will pump more than $2.2 trillion into the economy in the wake of the coronavirus health emergency, some equity analysts predict the country is in for economic hard times.
Global asset manager Unigestion has informed its investors to expect a nearly 3% contraction in the U.S. economy for 2020, and that is its best-case scenario. They warn that a 5.9% percent decline is not far-fetched. Unigestion says that as companies begin releasing report earnings, the calamity caused by the crisis will become clearer and investors will begin to sell, with a potential 50% cratering in market value as the full depth of the recession is clarified.
“Prices have fallen dramatically from where they were…but if we go back to our base-case scenario that we’re looking at something like a 2008 type shock, we think that earnings expectations still have quite a distance to fall,” said Unigestion’s investment manager Salman Baig. Baig also suggested that while the recent stimulus from the feds is welcome, he believes there will be a greater need for a global focus before investors will come back to the market.
At any rate, investors will continue to be wary until governments begin to loosen social restrictions and open the economy to business as usual. President Donald Trump has signaled that he would like to get things going again sooner than later but has continued to say he would listen to health professionals.