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June 22, 2020

Investors may be too optimistic of rapid economic recovery

By Paul Dennis

22 June

Stock markets have been performing above average despite a warning from the World Health Organisation that a new and dangerous phase of the pandemic is emerging.

The possibility of a fourth phase of stimulus package in the US and reopening of the economy are some of the factors fuelling this performance, leading investors to predict a quick V-shaped recovery.

The huge impact of the pandemic and a possible resurgence of cases may not lead to such a quick recovery.

Timothy McBride, Bernard Becker Professor at the Washington University, shared an article on how some investors are too optimistic of a quick economic recovery.

The article notes that stock markets are performing well in the US despite the rise in the number of Covid-19 cases.

Over the last few weeks, markets have performed above average prompting some investors to predict a V-shaped recovery, the article adds.

Such projections seem premature as they do not take into account the permanent damage caused by the pandemic.

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