• Minerd said it will be a while before actions taken by Congress and the Federal Reserve to mitigate the COVID-19 fallout can be assessed for their effectiveness
  • He said both the $1,200 checks to individuals and the paycheck protection program are misguided
  • He predicted unemployment could rise as high as 30% and it will be a long time before those people are absorbed back into the workforce

Despite Trump administration predictions of a strong third quarter rebound, Scott Minerd, the chief investment officer of Guggenheim Investments, said it may take four years before the economy fully recovers from the coronavirus pandemic.

“To think that the economy is going to reaccelerate in the third quarter in a V-shaped recovery to the level where gross domestic product was prior to the pandemic is unrealistic,” he wrote in a research note Sunday. “Four years from now the economy will most likely recover to the same level of activity that it was in January.”

Minerd said it’s too early to determine whether the actions taken by the Federal Reserve and Congress are enough to stave off disaster, but it’s likely they are “insufficient, misdirected and full of unintended consequences.”

He predicted the recovery will be disappointing because there’s no date-specific for ending the lockdown and the necessity of reopening the economy slowly because of health concerns. He also cited the likelihood of rolling lockdowns for the next two years as pockets of reinfection develop. Additionally, the sheer volume of layoffs – more than 26 million people filed initial unemployment claims in the last five weeks – means it will take the economy a long time to reabsorb those workers.

“Many of these people will not immediately be going back to work, even if the economy fully reopens by summer, which is probably unrealistic. The unemployment rate will probably spike to around 20 percent, maybe as high as 30 percent,” he predicted.

Sending $1,200 to people was the wrong move since many of the checks are going to those who are still working and don’t need it while for those truly in need, $1,200 will not go very far. He also criticized the paycheck protection program, predicting companies that can keep people on the payroll now are going to have to let them go later anyway because of diminished demand, and said the Federal Reserve’s asset buying program just treats the “symptoms of the problem, not the source.”

But Treasury Secretary Steven Mnuchin predicted Sunday the economy will rebound strongly beginning in July, aligning with a Congressional Budget Office forecast of a 17% growth rate in the second half of the year.

“I think as we begin to reopen the economy in May and June you’re going to see the economy really bounce back in July, August, September,” Mnuchin said on “Fox News Sunday, citing the “unprecedented amount of fiscal relief” being injected into the economy, some $3 trillion so far.

Billionaire businessman Barry Diller, however, also discounts the prospect of a quick recovery this summer.

“To anyone who thinks that this economy is going to bounce, I mean you'd have to have the idea of a rubber ball not in existence to think it's going to bounce high,” Diller said Sunday on CBS’ “Face the Nation”.

“It can't. The damage that's being done is catastrophic.”