The US economy may not fully return to normal until 2022, and the stock market is at risk of a correction later in the summer, a leading economic forecaster said on Friday.
Christophe Barraud, chief economist and strategist at Market Securities in Paris, said the best case for the US economy is for it to return to pre-COVID levels by the end of next year, but it could take until the first half of 2022. For Other developed nations, including Italy, could take longer, he said.
The eight-time Bloomberg News US economic forecast ranking winner and third-ranked MarketWatch ranking said his biggest concern is simply that life will not return to normal until a vaccine is found and people are feel comfortable resuming your lives.
Many companies had stressed balance sheets even before the pandemic occurred, and the risk is that these zombies will end up cutting jobs, causing an increase in unemployment. Another factor is uncertainty about geopolitical tensions, including between the US and China, but also between the US and Europe, and between China and India.
In addition, there are downside risks, including a second wave of coronavirus infections, electoral uncertainty in the United States, and questions about Europe’s planned recovery fund, he said.
Barraud said Nike’s NKE,
Disappointing results suggest further disappointments for the second quarter earnings season.
He said the stock market is a little overvalued due to specific factors such as liquidity and accommodative monetary policy around the world.
The market structure has changed, he notes, due to an increased retail presence in the market, as well as CTAs and hedge funds that have bought stocks aggressively.
The market should resist a new round of fiscal stimulus in the United States and the completion of the European recovery plan. “I wouldn’t be surprised to see a correction after these two events, maybe in August or something like that,” Barraud said.
He does not share the view that inflation will rebound as fewer companies operate after the pandemic. “I don’t think we should see an increase in inflation,” he said. He said he agrees with the bond market that there is no risk of a sustained spike in inflation.
While it fell sharply on Friday, the S&P 500 SPX,
It rose approximately 38% from its March lows. The yield on the 10-year Treasury TMUBMUSD10Y,
It fell to 0.64% and has fallen sharply from its January peak of 1.88%.
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