In just a month since the market hit a supposed bottom, the S&P 500 index is up roughly 25%, recouping a chunk of the loss racked up during the worst of the coronavirus market meltdown between mid-February and mid-March.
Still, money manager Alan B. Lancz says the market is now at an inflection point, and the next 45 days may be the most crucial in market history.
“The next 45 days may just become the most critical period in U.S. financial history,” Lancz wrote in a note this week. “While on average we may face a bear market every 10 years, this one is like no other.”
The coronavirus pandemic has sickened more than 869,000 Americans at the time of writing, and the outbreak has forced a near full-stop of all non-essential economic activity in order to help slow the spread of the virus.
While there are states in the U.S. that are already planning strategies for reopening their economies, Lancz said that the timing and execution of the reigniting of the U.S. economy could be one of the greatest factors in determining how the market recovers from the pandemic.
Lancz’s note came just days after the Trump administration issued guidelines for states to consider when working on plans to reopen their economies. While several state governors have begun relaxing social distancing guidelines and granting permission for some businesses to resume operations, President Donald Trump said Thursday that his administration may extend its national social distancing guidelines until early in the summer or later, marking a reversal from his prior eagerness to reopen the economy quickly.
“We may, and we may go beyond that,” Trump said at a White House press briefing when asked if the federal guidelines would need to be extended until the beginning of summer. “We’re going to have to see where it is. I think people are going to know just out of common sense. At some point, we won’t have to do that. But until we feel safe, we’re going to be extending.”
Amid discussions about getting things back up and running, business leaders and medical experts have cautioned that reopening the economy without proper testing is likely to result in another flare-up of the virus, which would have dire economic repercussions.
But even under the best circumstances, the economic recovery once things open back up is likely to be long and slow.
“Even if we execute properly, the recovery will take time and a best-case scenario is a ‘U’ shaped recovery,” Lancz wrote. “The much talked about ‘V’ shaped recovery is no longer in the equation because of the unprecedented combination of negatives with this crisis.”
“Unfortunately, this crisis has all three parts of the past bear markets’ sell-offs,” Lancz wrote. “This pandemic not only threatens America’s standard of living but also could position us as a secondary global power.”