JPMorgan Asset Management’s David Kelly warns that the economic rebound could soon stall as the “steroid kind of recovery” loses energy.
“We have seen what looks like a V-shaped recovery, but it’s really V-interrupted — it’s half of V,” JP Morgan Asset Management’s chief global strategist told CNBC. A V-shaped recovery is one in which an economy sharply rises after a recession.
“It looks like an economic recovery, but it’s really sort of a steroid kind of recovery. As the steroid of fiscal stimulus is removed, the economy is going to grow more slowly … it’s going to grow much more slowly in the fourth quarter than it did in the third,” Kelly told CNBC on Thursday.
While half of jobs lost in the U.S. have been recovered, Kelly said it’s “still going to be a crawl” until industries shut down by the pandemic can be reopened again.
“You need to deal with the pandemic to have a healthy recovery, it’s as simple as that,” Kelly said.
“I think we’re going to get stimulus anyway. I think people are obsessed with the issue of, do we get stimulus in the next two weeks,” he said. “What’s been going on between the White House and the House Democrats are all to do with politics. After the elections, I think there will be a stimulus package.”
“And in fact, I think if anything there’ll be too much stimulus,” Kelly said.
Although Democratic House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin are working out details of a new relief package, a deal is unlikely before the Nov. 3 presidential election amid stiff opposition in the Republican-controlled Senate, Reuters said.
With funding depleted, businesses, especially in the transportation industry, are either laying off or furloughing workers as demand remains subdued. More pain lies ahead amid a resurgence in new coronavirus cases around the country, which could lead to state and local government restrictions or more people shunning establishments like restaurants and bars.
The slow and uneven recovery from the worst economic downturn in at least 73 years and uncontrolled coronavirus crisis could cost Republican President Donald Trump a second four-year term in the White House when Americans vote on Nov. 3. Trump is trailing former Vice President and Democratic Party candidate Joe Biden in national opinion polls.
"There are still millions and millions on the nation's unemployment rolls because many of the jobs lost during the steepest downturn in economic history have not yet returned," said Chris Rupkey, chief economist at MUFG in New York. "Time will tell if the still-record number of people out of work will act as a brake on the economic recovery or whether the economy's fortunes depend more on the course of the virus."