No Quick Recovery

A quick recovery? Back to normal in another few weeks? I remember having this debate with a few of my friends in Florida back in the early days of the pandemic. The thought was that the economic damage would be short-lived and a full recovery would happen within a quarter or two. I was not that optimistic. And I see nothing that suggests our lives will be returning to normal anytime soon.

From TheStreet:

Federal Reserve Chairman Jerome Powell said the pace and scope of the current U.S. economic downturn are ‘without precedent” and cautioned that recovery could take longer than expected to gather momentum.

“The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II. We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased,” Powell said. “Since the pandemic arrived in force just two months ago, more than 20 million people have lost their jobs.”

“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Powell added.

Brett Davis, CEO of National Indoor RV Centers, posted a video a few weeks back where he provided his perspective on the state of the RV industry. The video is long but worth the watch if you have an interest. Here is what he had to say about the market:

With our economy completely shutdown for the month of April and then reopening of America to come in three phases over time I suspect the second quarter earnings and beyond to be awful. Every investor and fund manager will begin to wonder and worry about where the bottom will be for earnings. No one will want to try and catch a falling knife. I do not believe we have seen the bottom in this stock market.

Winnebago announced a resumption of operations which you can read in full here. However, there is a disclaimer:

Since the beginning of the COVID-19 crisis, Winnebago Industries has implemented significant cost containment and financial management measures and will continue to do so as conditions require.

While we closely monitor community conditions related to the pandemic and track consumer appetite for our products and outdoor activity, our organization will continue to make necessary and critical decisions around expense management, capital deployment, and strategic product development that will ensure our long-term financial stability and position our incredible team to compete successfully in the future. We remain convinced that the powerful appeal of the outdoors will endure through these uncertain times and end consumers will increasingly be attracted to the RVing and boating lifestyle.

The great financial collapse was a severe financial crisis that caused a deep and painful recession. Technically the recession ran from December 2007 until June 2009. It took many years for the economy to recover to pre-crisis levels of employment and output. The great financial collapse was a result of financial imbalances that had started primarily in the housing sector. A very different class of economic recession than what we now face.

Financial policy makers are preparing for the possibility of a far deeper, more protracted downturn. A quick recovery is unlikely. I get concerned when the chairman of the Federal Reserve characterizes the pace and scope of the current downturn as being without precedent. That does not sound very encouraging does it?

Eventually we will see things turn around. But it won’t be this month. Or next. It may take years.

Today I began looking at properties to rent. Perhaps the border will reopen for snowbirds in the fall. Given all that is going on, it seems prudent to consider alternatives.

Just in case there is a second wave coming.