The Federal Reserve’s Vice Chairman, Richard Clarida stated that “the development of several effective vaccines indicates to me that the prospects for the economy in 2021 and beyond have brightened and the downside risk to the outlook has diminished (source: Bloomberg news 1/8/21). He did caution that it would take “some time” for economic activity and employment to reach the peak level of last February.
Even with all the uncertainties created by the pandemic, third quarter GDP forecasts are up around 30%. The Federal Reserve’s Bullard weighs in at 30% (source: Wall Street journal 10/6/20), while J.P. Morgan forecasts 34.5% (source: J.P. Morgan Global economic outlook survey).
It has been barely 4-months since the pandemic lead to the shutdown of not only the US but most nations’ economies. The human and economic damage and suffering will continue for some unknown time.
The recent violent fall in prices of many asset classes is on a scale most of us have not experienced. The repricing of equities has lead Malkiel (quoted above) to argue for investors to increase allocation to equities. By extension, this would apply to other asset classes experiencing significant price declines whose fortunes are tied to corporations and businesses. So, corporate bonds would also appear to be attractive investments.