Maria Bartiromo: Wall Street expecting recession, quick bounce back
Maria Bartiromo explains why most Wall Street investors are expecting U.S. to dip into a recession but expect a quick bounce back
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Fox Business Network host Maria Bartiromo said on “America’s Newsroom” on Wednesday that she is "expecting a recession" followed by a "tremendous bounce-back" once the coronavirus pandemic slows.
Bartiromo made the comments the morning after lawmakers struck a deal on a $2 trillion relief measure to provide aid to those most severely impacted by the novel coronavirus pandemic.
The historic package will "rush new resources onto the front lines of our nation's health care fight,” Senate Majority Leader Mitch McConnell, R-Ky., said Wednesday, adding that "it will inject trillions of dollars of cash into the economy as fast as possible to help Americans workers, families, small businesses and industries make it through this disruption and emerge on the other side ready to soar."
“Even if people say it will be a light recession, we are talking about two quarters of contraction,” Bartiromo said on Wednesday.
She added that the estimates for the second quarter, which begins at the end of this month, predict “a contraction anywhere from negative 8 percent to negative 20 percent," though the severity is under debate among investors. Morgan Stanley and Goldman Sachs economists estimated the contraction for the second quarter at 24 to 30 percent.
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Bartiromo went on to note that “it’s all up to the doctors, the scientists to tell us when it’s actually safe to go back into the water" in terms of restarting business activity and heading toward growth in the third quarter.
She said without that information and without the coronavirus “behind us you won't see the economic activity pick up at all.”
Bartiromo’s comments came one day after the Dow Jones Industrial Average soared more than 11 percent, booking its biggest percentage gain in 87 years. The 2,113-point increase was the most ever in a single day.
Earlier this week, however, the stock market lost more than a third of its value since its record last month, as more businesses shut down with the goal of trying to slow the spread of the coronavirus. Economists increasingly say a recession seems unavoidable.
Markets are likely to remain incredibly turbulent as long as the number of new infections accelerates. In the interim, investors are looking for both central banks and governments to do their parts to support the economy.
When asked what sectors stand to benefit the most from the coronavirus stimulus bill Bartiromo said, “Certainly you’re going to see a pretty good bounce-back from the financials and certainly mid-cap businesses, energy, some of those companies are getting a two-sided punch, not just the coronavirus impact, but also what's going on with the price of oil down to $24 a barrel or so.”
She then noted that “there is a fair amount of expectation” that many small businesses, including restaurants, “will not make it because you are talking about an extended period of time with no income, no business, no customers.”
“That’s why it was so important to get money into the hands of small business,” she added.
Bartiromo went on to say, “I think you are going to see a rebound, the question is, how long can businesses go with no earnings? How long can a business keep up with no cash flow and no customers? But that's the situation we find ourselves in, which is why that stimulus was so important.”
She then pointed out the emergency action the Federal Reserve has taken to try and stabilize the economy.
The central bank said on Monday that it would purchase Treasury securities and agency mortgage-backed securities in the "amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy."
In addition, the Fed launched three new lending facilities that will provide up to $300 billion in new financing to support the flow of credit to employers, consumers and businesses.
“The fact that you’ve got the Treasury now with increased power in order to make some of those loans to small businesses is a big deal,” Bartiromo said. “So this is a welcome situation for what has been a very tough, probably the toughest period for some of these businesses.”
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Fox Business’ Maria Bartiromo, Jonathan Garber and the Associated Press contributed to this report.
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