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April 06, 2020 at 10:01 AM
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The economic fallout from the COVID-19 pandemic will not end when the world begins to recover from its ravages.
There will be many “lasting effects” from the economic impact of the coronavirus pandemic, which has “pushed already weakening worldwide economies into a recession,” says economist and investment advisor Gary Shilling, founder of A. Gary Shilling & Co.
Those effects will mark the differences between the pre-coronavirus world and the one that follows.
The commercial real estate sector, for example, will likely suffer.
BlackRock CEO Larry Fink in a recent teleconference “questioned the viability of commercial real estate anywhere” once the global economy begins to recover because many companies that have learned to successfully conduct business remotely may not see the need to maintain the same level of office space post-crisis.
Consumer behavior could be changed forever by “the online world of contactless commerce,” according to an article from McKinsey & Co., Beyond Coronavirus: The Path to the Next Normal,
In his latest monthly Insight report, Shilling, a long-term bear on stocks and long-term bull on bonds, especially long-term Treasurys, lays out many changes in the economy, financial markets and social relationships that he foresees in the post-coronavirus world. Among them, a probable 20% to 30% decline in stocks before a rebound takes hold but continued underperformance relative to the economy until elevated cyclically adjusted price-to-earnings ratios “return to normal.”
In contrast, Shilling expects Treasurys, “the ultimate safe-haven asset,” will continue to be attractive to investors even if yields remain low or turn negative because of a deflation.
Visit the slide show above to see what Shilling says is in store for us and note that direct quotes are from his report.
— Related on ThinkAdvisor:
Slideshow
