Stifel chief economist sees difficult path to recovery

2020 has been a year like no other. Uncertainty remains as the number of coronavirus cases rises and a new strain in the United Kingdom.

Despite the availability of a vaccine, which is now being rolled out, surveys show some unwilling to take it and others questioning its effectiveness.

In addition to this, Stifel Chief Economist Lindsey Piegza, believes politics and consumer's slowness to return to life as normal for a time after the vaccine is administered to a large portion of the population.

"The pathway to a sustainable positive growth rate could be more difficult and more complex to attain than previously anticipated given the reduced level of control that policy makers have to spur the economy back to prosperity," she said. "In all likelihood, the road ahead will be long, bumpy and uncertain with party politics adding volatility along the way and the virus itself determining the path to recovery. Beyond the initial snap-back recovery favoring some sectors, a sizable segment of the economy may in fact take much longer to rebound."

Next year will start with slow growth, with recovery "contingent on the market’s ability to return to some semblance of normal day-to-day activity, which in turn will hinge on the ability to separate the healthy from the sick," Piegza said. "Even when government officials decree the private sector is once again open for business – be that through further safety measures or widespread vaccination — it will take time for the broader economy to return to pre-pandemic levels."

Since the crisis is spurred by a health issue, "there is no absolute policy solution as consumers may face lingering hesitancy to reenter the market or interact with others or crowds as before, and businesses may take time to reconnect with employees or supply chains.”

Indeed the coronavirus tops the news and will be a determinant of the recovery.

Bryce Doty, senior vice president and senior portfolio manager at Sit Fixed Income Advisor, noted the deal for a relief package "should be enough to bridge the gap between now and when lockdowns are lifted."

Addressing the "aggressive new strain ... that is causing fears of more shutdowns, not to mention sending a cold chill up the spine over the thought of what will happen if developed vaccines can’t protect against the new strains," he said, reports suggest "there are now as many as a dozen strains of the virus and vaccines appear to work on all them so far."

National activity index
The Federal Reserve Bank of Chicago's National Activity Index slipped to 0.27 in November from 1.01 in October, signaling “slower, but still slightly above average growth," the Bank said Monday.

Three of the index's four components remained positive in the month, but all declined from October's levels.

The index’s three-month moving average, CFNAI-MA3, fell to 0.56 in November from 0.85 the previous month.

The diffusion index slid to 0.53 in November from 0.62 in October.

Forty-nine of the 85 components of the index were positive in the month, and 36 were negative. Of the 20 that improved in the month, five were still negative.

Production-related indicators added 0.14 to the CFNAI, employment-related ones added 0.15, and sales, orders, and inventories added 0.07.. Personal consumption and housing subtracted 0.09 from the index.

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