Economists are now debating about whether the shape of the looming U.S. economic recession and recovery will look more like a “V,” “W,” “U,” or “L.” The betting now is on a “V,” which implies a short recession and rapid recovery. But if anger and a new call for the de-globalization of supply chains takes hold, that hoped for “V” could quickly become an “L.” This is what the equity markets seem to be signaling with its rapid plunge.
If hospitals become overrun and physicians are forced to decide who to save and who to let die, the outcry will be a “culture of greed” that prioritized the economy and stock market over life. This will make investing a painful endeavor for years to come. If, however, everyone that needs a hospital bed gets one, then the lasting damage will be mitigated, and the market has a much better chance to recover to the old highs.
Although markets are clearly pricing both a decline corporate earnings and a contraction in gross domestic product, their real worry is long-term damage from a poorly constructed response that continues to place economics over life.
This article was provided by Bloomberg News.