Economy Will Rebound in Second Half of 2020 as States Reopen for Business, Goldman Sachs Report Predicts
Goldman Sachs is predicting that the United States will see an economic rebound in the second half of the year following the downturn connected to the ongoing coronavirus pandemic.
The financial firm released its first earnings report of 2020 on Wednesday, which showed the company with lower first-quarter earnings than in previous years. However, the report did not indicate as sharp a drop as initially expected.
The report outlined the company's revenue through the end of March 31, with a noted drop in earnings per share from $5.71 during the first quarter of 2019 to $3.11 this year.
"Our quarterly profitability was inevitably affected by the economic dislocation," Chairman and CEO David Solomon said of the results.
Though the company's net revenue reports in the first quarters of 2019 and 2020 reflected relatively small differences ($8.81 billion last year compared with $8.74 billion this year), Goldman Sachs acknowledged that the real impact of stay-at-home orders issued in response to the COVID-19 pandemic throughout the United States and around the world won't really be felt until the second quarter.
"While the uncertainty is substantial, we expect the lockdowns and social distancing to result in sharply lower new infections over the next month, and our baseline is that slower virus spread and adaptation by businesses and individuals should set the stage for a gradual recovery in output starting in May/June," the company said in the report prepared by its economics research team last month.
In its report, Goldman Sachs predicted an economic rebound would begin around mid-2020 after the worst of the pandemic passes through the U.S. Since many businesses closed temporarily with the goal of reopening once stay-at-home orders have lifted, the company predicted the sharp economic decline would be followed by a similarly sharp recovery.
Goldman Sachs' hopeful message came just days after some U.S. governors began discussing plans to reopen their state economies. Most state leaders have been cautious in drafting their strategies, an approach that seems to have the support of Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases and member of the White House Coronavirus Task Force. As Fauci told the Associated Press Tuesday, local economies are unlikely to open as soon as May 1, the date on which some state stay-at-home orders are set to expire.
"We have to have something in place that is efficient and that we can rely on, and we're not there yet," Fauci said.
While next month may be too soon to expect a rebound, some economic analysts said they hope to see a "V-shaped recovery" once the immediate threats posed by the pandemic subside.
Graph provided by Statista.
The sudden decline caused by business closures and subsequent surges in unemployment could result in a jumpstart to recovery once local economies reopen. However, this optimistic perspective isn't universal. According to a Reuters poll earlier this month, economic rebound predictions made by 50 economists in the U.S., Europe and Asia ranged from three months to two years.
With the number of reported COVID-19 cases around the world topping two million Wednesday, companies like Goldman Sachs are projecting confidence that stay-at-home measures will slow the spread of the virus until a vaccine is developed and approved for distribution.
"As public policy measures to stem the pandemic take root, I am firmly convinced that our firm will emerge well-positioned to help our clients and communities recover," Solomon said.
