The rebound will be much more gradual than the V-shaped pattern investors are betting on
by Margaret Vitrano
Everyone wants the global pandemic to be a short-term problem for the stock market. It will not be.
Equity markets are factoring in a V-shaped economic recovery, with S&P 500 earnings expected to recover in 2021 to a slight increase over 2019. Better-than-expected May and June jobs reports — and record May retail sales growth — provided a boost to more cyclical and value-oriented areas.
But if the states experiencing surges of coronavirus infections are forced to reinstate restrictions on business activity, these conditions may end, fast. While much of the U.S. stock market is discounting for the perceived pandemic recovery, we believe economic recovery will be more gradual.