Recession Will Be Over By The End Of 2020 According To Economic Expert

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Recession Will Be Over By The End Of 2020 According To Economic Expert.

The impact of Coronavirus on the World economy is YUGE, as scientists efforts to create vaccine for the pandemic showing promising results; Economist are also seeing light at the end of the tunnel.

Promising Coronavirus Vaccine Showing Sign Of Success
Promising Coronavirus Vaccine Showing Sign Of Success

last summer, when the U.S. had just notched a decade of economic recovery and unemployment stood at 3.7%, Campbell Harvey, a professor of finance at the Fuqua School of Business at Duke University, predicted a recession for 2020 or early 2021.

Why? Because the yield on the three-month Treasury bill was higher than the yield on the five-year Treasury note for the entire second quarter of 2019. That “inverted yield curve” had been the harbinger of the previous seven recessions. Harvey first identified the inverted yield curve’s predictive power in his 1986 doctoral dissertation at the University of Chicago.

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So, here we are in what could be the deepest recession since the Great Depression, triggered by a global pandemic and governments’ unprecedented actions to prevent its spread. What does Harvey expect for the U.S. economy now? He sees this recession hitting deep but being short — with the economy in recovery mode by the end of this year.

Campbell Harvey
Canadian Economist Campbell Harvey

“In the global financial crisis [in 2008-09], we never could tell when it was going to end,” he said in a telephone interview. This time, he said, “the cause is clear — it’s a biological event, and the solution is also clear: another biological event.”

Recession Will Be Over By The End Of 2020 According To Economic Expert.

He doesn’t anticipate the V-shaped recovery that Wall Street touted a few weeks ago. “I think it’s more what I call the ‘skinny U,’ because I do believe that we will have a vaccine by the first quarter [of 2021] due to help of patriotic citizens, ” he said.

That’s certainly more optimistic than the projections of experts like Dr. Anthony Fauci. But the strong recovery of the Dow Jones industrial Average from their March lows suggests forward-looking investors are factoring this in, too.

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Harvey’s recession call was more pessimistic than most forecasters at the time, who saw no recession for this year, either. Would the recession have happened without the pandemic?

“We’ll never know the counterfactual,” he said. “The inversion was moderate, so I think that we were headed towards a mild, short recession. Then the COVID-19 pandemic struck and changed everything.”

Impact Of Coronavirus On The Economy

Indeed. Harvey considers the novel coronavirus an accelerant of underlying trends resulting in this recession, which he thinks began in the first quarter of 2020. We’re going through the worst of it right now. “Think of the second quarter as the worst quarter of [GDP] growth that the U.S. has ever experienced, historically,” he said. “It could be 30% negative on an annualized basis. The third quarter, it’s hard to imagine getting worse than where we are.”

Harvey adds that he can see some green shoots just in time for winter, as coronavirus treatments emerge and the world gets closer to testing and deploying a vaccine. “A vaccine is the solution in terms of reducing all of the uncertainty. A vaccine means ‘all clear,’” he said. ”If we’ve got some pharmacological solution that reduces the risk of death, that’s also incredibly helpful.”

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Neither Harvey nor I are experts on vaccines, so I’ll stay neutral on this, but he has done some research and says a vaccine will be available sooner than most expect.

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Recession Will Be Over By The End Of 2020 According To Economic Expert.

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CDC Officially Added Six New Coronavirus Symptoms To List
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