What Shape is Your Recovery?
What has struck me about this recession are the predictions about how we come out of it. Just about every talking head on every cable channel seems to be playing from the same sheet of music. Almost all are predicting an ugly recovery—an “L” shaped recovery. It would obviously look like this:
That’s a bad way to come out of any downturn because it means the economy and the financial markets will go straight down—and stay down—for quite some time, as we limp along the bottom for as long as several years. I have seen a dozen “experts” predict that scenario.
I have not heard anyone predict a “V” shaped recovery. That would obviously look like this:
This would mean that we would snap right back as the letter suggests. I think this is hardly likely. That’s because we know unemployment is going to get worse before it gets better, so the economy would have a hard time pulling this trick off.
I am hoping—and yes, predicting, what few have predicted: a “U” shaped recovery, although it might be a slow one:
This recovery suggests that we will come down (as we have), will stay on the bottom for a bit but then slowly but surely come out of it. Will we regain, say, the highs in the stock market—14,000 on the Dow? Yes, eventually, but it will take years, not months. Since fear is such a powerful factor in the markets, they go down faster than they go up. But we will regain our former strength, and once again be respected as having the world’s greatest economy. But in order for this to happen we will all have to be patient. There are many smart people working on the problem(s), but we are in uncharted waters. So much of what has happened is simply unprecedented.
However, I remain cautiously optimistic. We have seen some recovery in the Dow and we know the financial markets always look ahead. I try to do the same thing. That’s because constantly looking backward or dwelling on what has been lost will not help the current situation.
So “U” is my shaped recovery. Please weigh in. I would love to hear what your recovery shape is!