The next 9 months could be severely tough for the markets, if a prominent Silicon Valley venture capitalist is to be believed. The usually optimistic analyst believes the economic impact of Covid-19 will be significant on the economy of the United States.
Adapting to New Avenues Essential for Companies to Survive
The economic crisis will take around five quarters to reverse the trend, according to the tech executive. No economic growth is expected until the late fall. Until early 2021, a total recovery isn't likely. Companies could either break away or get destroyed in the midst of the competition if they hold on to their primary raison d’etre. They would need to chart a new course and innovate or suffer the consequences. This highlights which companies are truly successful in adverse situations. Such companies have come through economic crises in the past, including Cisco who developed one of the earliest video conferencing solution in 2006 as a result of the 2005 bird flu pandemic
Unlike the universal nature of COVID-19, the 2005 bird flu pandemic was much smaller. Nonetheless, companies can use this crisis to improve themselves and be future-ready. According to the venture capitalist, nearly 70% of the start-ups now and nearly 40% of current Fortune 500 companies could cease to exist in a decade unless they make the transition to digital.
US Economy Eventually Expected to Rejuvenate
The U.S. economy is not expected to get back to normal till April 2021-22, according to a survey of 114 venture capitalists and 286 seed Series A founders. Almost 40% of venture capitalists agree with this. The disproportionate job loss will impact the economy significantly unti the fall, says the venture capitalists. That is when the economy is expected to rejuvenate itself. He believes the Fed, the Treasury Department, and the Government have managed to react to the situation fast.
So, he expects the US to emerge with a stronger economy following the end of the Covid-19 pandemic. The current volatility in the stock market caused by coronavirus is the largest since the crash of 1929. In the past 5 weeks, the S&P 500 index witnessed daily price change in the region of 4.8%. On Tuesday, the S&P 500 and the Dow Jones Industrial Average posted their largest blown gains since October 2008. Such extreme volatility indicates a bear market.
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