Stop trying to figure out the shape of the recovery: BMO strategist
Investors are “way too enthralled” with trying to figure out what the shape of a recovery will look like, says one BMO strategist.
“Stop trying to figure out whether or not it’s an ‘L’ or ‘V,’ and just let the market and the companies come back and get back to business,” Brian Belski, chief investment strategist at BMO Capital told Yahoo Finance.
Belski says the proof is going to be in the pudding with respect to how company earnings play out. “At the end of the day, we know that the longer the shutdown continues, the more that earnings are going to be heard.”
His comments came on the same day the Dow (^DJI) and S&P 500 (^GSPC) rallied following a new $2.3 trillion Federal Reserve plan to support Main Street businesses and local governments hit by the pandemic.
“Monetary and fiscal policy does not create a bottom, but it fuels the recovery,” said Belski.
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On Thursday, weekly unemployment claims surged more than 6.6 million, marking the third consecutive week of filings in the millions. The prior week’s record-breaking figure was revised higher as the coronavirus pandemic is keeping large parts of the economy shut down.
‘Trying to call a peak in claims ... is a fool’s game’
“Trying to call a peak in claims is like trying to call a peak in coronavirus, or peak in the market: It’s a fool's game,” said Belski. “I think it's really gonna come down to human nature in terms of getting back to work. “
Wall Street analysts have noted that some of the job losses are temporary. Goldman Sachs predicts a scenario similar to the 1981 recession, in which millions of workers were re-hired once financial conditions eased.
Belski says some companies have been front-loading layoffs. That’s going to change when the pandemic eases and states begin to lift shelter in place orders.
“We’re going to see people come back to work, and we’re going to see less negative employment claims,” he added.
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Ines covers the US stock market from the floor of the New York Exchange. Follow her on Twitter at @inesreports.
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