The economy will be weaker than it was before Covid-19 for many years. From James Rickards at dailyreckoning.com:
Everyone knew the second quarter of 2020 was going to be a disaster, and it was. The U.S. economy fell by 31.4% (annualized) in the second quarter.
But, the expectation was that we’d have a V-shaped recovery with a sharp bounce-back in the third quarter, a reopening of closed businesses, rehiring of the unemployed and a rising stock market.
But so far, the economy is not following the script laid out for it by the politicians and experts.
The stock market did rally, but that was mainly because the stock index components are heavily weighted to companies least affected by the pandemic including Amazon, Apple, Netflix, Alphabet (Google), Facebook and Microsoft.
Of course, it didn’t hurt that the Federal Reserve printed $4 trillion of new money and backstopped money markets, corporate bonds, municipal bonds, foreign central banks and other facets of capital markets with direct purchases, guarantees or currency swaps.
Even at that, stocks have been struggling since hitting new highs on September 2.
And yes, there was growth in the third-quarter (the best estimate is that the economy will grow at about a 35% annualized rate, but we won’t have official figures until October 29).
The 35% third-quarter recovery was to be expected as Americans got back to work after the lockdown. That 35% rate might sound like the third quarter will basically make up for the second quarter, but it won’t.