The US economy could decline by 20+% from peak to trough through the late summer. Even with
an expected bounce back over the last five months of this year, there could be 25-30 million people
out of work on NewYears Day, 2021. SPX profits could be down from $155. a share to $100. by
the time the year closes out. A gradual re-opening of the economy featuring regulations on
social distancing and the maintenance of sanitary places of business may secure a modest rebound
in the economy right through 2021, even with successful vaccination and improved therapeutic
programs. a significant amount of dumb political leadership and reckless individual behavior
could set the US back periodically both in terms of the battle against the virus and in the economic
realm. I hope the clear right wing foolishness we are seeing, even though aided and abetted by
Trump, does not rise to a threatening level. The general public fears Covid-19 and will be cautious
as we proceed. If warm summer air slows Covid's progression temporarily, this summer, then I
hope folks do not let their guard down. The medical experts seem to agree it could come back
with a vengeance in late autumn and this means states have to ramp up testing and contact tracing
as much as they can.
I remain concerned about deflationary pressure and its effect on debt coverage capability across
sectors of the economy. With the recent large decline in resource capacity utilization, my deflation
pressure gauge has reached the low levels seen during the Great Depression. Possible wide scale
business defaults across the globe could lead to cascades of additional bankruptcies here and
there and keep the large gaps in capacity and elevated levels of unemployment large enough to
retard economic growth for years to come.
The SPX is now wildly overvalued on 2020 fundamentals and continues to discount a recovery
in earnings power that may not arrive until 2022 or thereafter without massive pro- growth
fiscal policies. Trump is so far out of his depth that should he win re-election this November,
and should the Senate stay in GOP hands, economic and social stability could well be
I have managed money for nearly a half century and have managed to maintain my cool through
all those years. As a New York guy, I know well how vicious this virus can be. So, I have plenty
of emotion now and can only hope folks come to treat Covid as the threat as it is.
With this rant out of the way, I plan to gather my wits again and face the future as it comes.
Watch over your selves and those who are near and dear.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!