CFO Focus: The economy will slow down, but not for long

The path of the global and domestic economy continues to vex us in the relatively uncertain COVID-19-recovery world. The only precedent that might guide us is the end of World War II. However, at the end of that global conflict, the United States emerged unscathed. This time, no nation has been unscathed.

However, another difference between the two events is that with COVID-19, the potential recovery is akin to a flick of a switch—”economy off/economy on,” if you will. Fifteen months ago, when the global economy slammed shut, would we have expected to be talking about a rapid recovery in early 2021? In early 2020, it wasn’t far-fetched to assume that asset values would be plumbing depression-like depths. Instead, such assets as cars, houses, commodities stocks, corporate debt and municipal debt have soared to all-time highs. The huge game-changers were the rapid development of effective vaccines that were ready to go at the end of 2020 and getting into arms in early 2021 and unprecedented monetary and fiscal stimulus.

Vaccines Impact the Economy

In the spring of this year, it appeared that by now we would be looking at COVID-19 mostly through the rearview mirror. With nationwide vaccination rates soaring and the economy rapidly reopening, it seemed that economic growth, if not globally at least nationally, might come in a little too hot, sparking corrosive inflation. Inflation was on the lips of nearly every economist, investor and market pundit. In the last few weeks, however, with COVID-19 surging once again, market participants and economists have become pretty quiet about inflation. Now the discussion has returned to the threat COVID-19 poses for both the domestic and global economies.

 

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