Richard Bernstein said he would be “shocked” if the U.S. doesn’t fall into a recession on a webcast with advisors today.
“We’re talking about shutting down entire industries,” Bernstein, who runs an eponymous asset mnagement firm, remarked. “It’s not going to be over in a matter of days.”
The former Merrill Lynch chief investment strategist, who was named Wall Street’s best strategist 18 times, believes the impact of the coronavirus is likely to inflict more damage on the markets and economy than most investors expect. Bernstein’s views are significant for several reasons, not least of which is that he predicted the current aging bull market would rival that of the 1980s and 1990s shortly after the financial crisis ended.
The blasé attitude of investors about the virus is similar to that of ordinary citizens, Bernstein said. He cited a quote from a Minnesotan infectious diseases specialist who said people are treating the disease like a late winter blizzard that will be over in a few days. In reality, this is just the beginning of winter, the disease expert said.
All the economic data indicated that economic and market fundamentals were slowing over the last three quarters and several parts of the economy were displaying “outright deterioration,” he said.
Leading economic indicators were softening. The yield curve inverted. Some industries were experiencing a recession. Moreover, the American economy has suffered three straight quarters of “below-average growth,” he added.
In January 2020, investors appeared to be afflicted with “bubble-like characteristics" typically associated with an extended bull market. Two months ago, people were talking about “taking vacations in outer space,” Bernstein observed. “Investors became shocked by [even] the possibility of a recession,” he said. Now they are talking about a global pandemic.