Schwab Market Perspective: Watching the Shape of the Recovery
By Liz Ann Sonders
By Jeffrey Kleintop
By Kathy Jones
U.S. stocks have been fairly resilient lately, even as coronavirus hotspots flare up around the country. Although consumers and businesses are increasingly worried about rolling shutdowns, major stock indexes generally have moved sideways. How long can this continue? Much depends on the shape of the economic recovery.
Global stocks have held onto their gains, as well. There may be an incentive for investors in some countries to anticipate that an economic slowdown—perhaps a W-shaped recovery instead of a V-shaped one—wouldn’t be so bad because governments could step in and buy stocks.
In fixed income markets, we expect second-half returns to be driven more by coupon income than price gains, and by government fiscal policy rather than central bank monetary policy. This would be basically a reversal of what happened in the first half.