A U, V, W Recovery
By Dian Vujovich
The suggested ways in how our economy will recovery reads like an end of the alphabet soup of letters. There are U-, V- and W-shaped recovery suggestions. Why not a Y or Z?
In case you’ve forgotten, a V-shaped economic recovery happens when there’s a sharp fall that’s followed by a fast rise upward. Growth picks up quickly in it. Think W-shaped and that would be a sharp fall down, followed by a sharp rise up, and then another sharp downward fall and another sharp move up.
A U-shaped economic recovery is gentler that the two previously mentioned as prices decline gradually and recover the similarly but slowly. NYU’s economist Nouriel Roubini thinks the recovery of the world economies will follow that U-shape and underperform for the next three years.
There’s also an L-shaped one—that’s a hard fall followed by a long and lingering recovery. I’ve heard it called a dreaded recovery—the kind Japan has endured.
If Y or Z were part of the suggested schemes perhaps a Y-shaped recovery would be one in which no one speculated about the shape of things to come. Instead, spent an inordinate amount of time trying to figure out Y things happened in the first place. It would be followed by the powers that be making some appropriate corrections within the marketplace so that future corrections might be kinder and hopefully less severe.
Then there’s my make-believe Z-shaped correction. I’ll call it the Zorro recovery. Picture Antonio Banderas dressed in black, whipping out his very long sword in The Mask of Zorro and quickly using its blade to cut through a wall of fabric to leave his very distinguishable one-of-a-kind mark. A Z-shaped recovery would be one in which investors in all markets are keenly and abruptly reminded that investing isn’t child’s play, comes with no guarantees and can slash into pieces even the finest thought-out long-term financial plan.
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