"Pandemic fear may have set up both the economy for a surprisingly strong 2021": WS strategist

"Pandemic fear may have set up both the economy for a surprisingly strong 2021": WS strategist

Davis (The Jaihind Express Web Desk)

Leaders in government, business, and finance might all be overreacting to the coronavirus pandemic, James Paulsen, chief investment strategist at The Leuthold Group, said in a Friday note.

In the private sector, companies have made their own precautionary moves. Firms "moved quickly and decisively to scale back operations and lower breakeven points" as the virus roiled economic activity, Paulsen said.

Separately, credit card debt has steadily declined through the downturn. In previous recessions, balances generally didn't drop until well after the slump.

Invested Americans exhibited similar behavior. Despite major indexes sitting just below record highs, hundreds of billions of dollars in investor capital moved from stocks to safe havens and remain there.

"The COVID collapse has left investors sitting on a considerable amount of dry powder, over-weighted with defensive assets, and pessimistic about future financial-market scenarios," he added.

The coronavirus crisis and subsequent recession is likely the most emotional recession faced by Americans, Paulsen said. While an overreaction is "understandable," it also drives behavior that will shape the nation's recovery into 2021 and beyond.

Once the coronavirus is handled, the cocktail of accommodative economic policy, healthy household saving, defensive investing, and corporate efficiencies will likely drive an "unexpectedly strong economy in 2021 and, perhaps, a surprising further rise in the stock market," the strategist added.

With input from agencies