Now economists and market experts are debating how strong the eventual rebound will be. The answer may have something to do with basketball star Michael Jordan.
Instead, the recovery could be shaped more like a Nike swoosh. The bottoming out process may take a little longer to take hold, but once the rebound starts it would be steady and gradual.
In other words, it could look like the Nike logo — popularized during Jordan’s heyday with the Chicago Bulls and his eponymous line of Nike clothing, starting with Air Jordan athletic shoes in 1984.
“I think we’re going to see a Nike swoosh shape as we work our way out of this crisis. We had a hard, fast drop in March, and I think how we bounce back will be a long, steady inching up through the end of 2020,” said Steve Rick, chief economist at CUNA Mutual Group, in a report last month.
That kind of comeback would be similar to what happened in the wake of the Great Recession of 2008, which didn’t feel like much of a recovery at first.
This type of rebound depends on a number of factors. The Federal Reserve, Congress and the White House have already launched several rounds of stimulus in an effort to help struggling consumers and businesses, but more money may be needed.
“Our base case of a recovery that looks like a Nike swoosh depends upon robust and sustained fiscal and monetary policies put forward by the federal government and Congress,” said Joseph Brusuelas, chief economist with RSM US.
That assessment is shared by KC Mathews, chief investment officer with UMB Bank.
“Our assumption is the economy will open in a few weeks, the virus will become more controlled and adequate stimulus measures will be put into place. Perhaps an upward sloping ‘L’ shape, or swoosh, is the best descriptor,” Mathews said in a report.
Invesco global market strategist Arnab Das has his own variation, which he has dubbed a square root recovery because that symbol (√) is similar to the Nike logo.
But there’s a big difference between a square root and a swoosh scenario: the former could involve an extended period where economic activity stalls following the recovery; in a swoosh framework, the rebound would continue, albeit at a sluggish pace.
Matthew Miskin, co-chief investment strategist with John Hancock Investment Management, has yet another name for what may happen next: the fish hook recovery, which may look like the swoosh and square root symbols, but has a slightly different trajectory.
“When you go over the barb of the hook, it really hurts. But then the hook bends and it starts to go a bit higher.” Miskin told CNN Business. “It’s kind of the same thing as the Nike swoosh.” In other words, he thinks the recovery will pick up steam rather than peter out.
The economy will muddle along for the next few quarters, Miskin added, before starting to snap back at the end of the third and fourth quarters as consumers gear up for the holidays.
Some worry the rebound scenarios are too optimistic
Whatever you call the shape of the recovery, these are all very hopeful predictions. Are they overly bullish? Perhaps.
Miskin worries that a second wave of the coronavirus could hamper consumer spending and end any chances of significant recovery.
“The consumer needs to come back. If that doesn’t happen, it will weigh on the recovery. It would be more muddled,” Miskin said.
It’s also important to remember that April’s stock surge doesn’t mean the worst is over.
“I think you have to separate the market and the economy,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab. “The market is now saying things will be better six months from now. That’s not necessarily the same thing as things being back to normal.”
The sad reality is that in any recovery, some people and companies will be left out — much like the aftermath of the Great Recession.
“There will be a delay in the comeback and ultimately a slow recovery,” said Larry Adam, chief investment officer with Raymond James.
“There are some businesses that will not survive,” Adam told CNN Business. “There are so many psychological barriers that people have to overcome before things return to normal.”