Here's what a bounce from the coronavirus recession might look like based on 1950 data: Hint: U-shaped recoveries "never really happen"


Prepare for a rapid and powerful economic rebound from the coronavirus pandemic, analysts at Morgan Stanley said in a research note on Monday.

A team of analysts, including eminent researcher Michael Wilson, has already said that the worst is behind us for stocks, but the US equity strategist and his team say the economic recovery of COVID-19 will likely have a V shape, citing research that follows the rebound of the last decades after a recession.

Specifically, analysts looked at the last 10 recessions since 1950 and found that severe economic recessions still coincided with a significant increase (see attached chart with data from Haver Analytics and Morgan Stanley).

Here's what a rebound from the coronavirus recession might look like based on 1950 data: Hint: U-shaped recoveries

Analysts say many customers the bank talks to are at Camp U, expecting a slow and gradual recovery, but Morgan Stanley says such gradual recoveries after a painful recession "will not happen." never happen. "

"So we continue to opt for the" V "and use our recession manual in a methodical and opportunistic manner as the markets shrink and circulate around the many uncertainties that should remain with us this year," Wilson wrote. and his team, which includes strategists Adam Virgadamo, Andrew Pauker and Michelle Weaver, in a note on Monday.

Morgan Stanley analysts have recognized that a "W" or double dip recession is possible, but it would still mean that the United States sees at least a "V" recovery.

The researchers also say that loosening the locks is unlikely to be applied again with the same severity as states begin a gradual reopening process after the closings that have been implemented to curb the deadly pathogen. COVID-19 has infected more than 4 million people worldwide, according to data collected by Johns Hopkins University

.

These comments come as economists and investors engage in an alphabet-driven debate about how to recover from the COVID-19 recession. Friday's labor market figures showed that 20.5 million jobs were lost in one month, bringing the unemployment rate to 14.7%. This represents a notable increase in the unemployment rate of 4.4% in March to the highest level since the Second World War.

Investors have little comparable experience in dealing with the effects of a deadly viral epidemic like the one first identified in Wuhan, China, last year.

The market rebound from its lowest coronaviruses on March 23 was notable. The S&P 500
SPX
+ 0.01%

it is about 13% below its February 19 closing high, while the high-tech Nasdaq Composite
COMP,
+ 0.77%

It was 6% on its historic high and the Dow Jones Industrial Average
DJIA
-0.44%

it was around 17% from its record level of February 12.

Admittedly, even if the economy rebounds vigorously, market players say stocks may still be vulnerable to a pullback due to their recent rally and the uncertain trajectory of reopenings and the virus.

Tony Dwyer, chief market strategist at Canaccord Genuity in a note on Monday, said lagging movements in economically sensitive sectors, including the industrial and financial sectors, are not adding to a lasting recovery in V shape for actions as a whole.

Read: Why the Dow can jump 400 points even when the economy destroys more than 20 million jobs

Check: As coronavirus cases develop outside New York, Goldman warns of risks of market upturn

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