Recovery: The Shape of Things to Come Part Deux

by | Oct 11, 2020 | Financial Independence

Recovery: The Shape of Things to Come Part Deux

by | Oct 11, 2020 | Financial Independence

economic recovery

Last time we talked about a couple of possible shapes for our economic recovery: A“V” recovery, in which the economy goes back up just about as quickly as it went down, and a “W” or “double dip” recovery, which is characterized by a quick upturn in the economy followed by another downturn.

Well, guess what? There are even more shapes and more possibilities. So, let’s look at those.

“U-shaped” recovery. In a U-shaped recovery, the economy takes a longer period of time to rebound and thus looks like a “U” rather than a “V” when charted.

“L-shaped” recovery. This is the least favorable recovery scenario. In an L-shaped recovery, the economy recovers somewhat but takes years to reach the level it was before the downturn. The recovery from the 2007 Great Recession was L-shaped.

“Z-shaped” recovery. In this, the most favorable scenario, the economy bounces back to above the level of the baseline set before the crisis.

“K-shaped” recovery. In a K-shaped recovery, one segment of people in the economy have nearly or fully recovered, while another either continues to experience a downturn or does not recover as quickly. This is the shape that has received the latest mention in the news.

“Swoosh-shaped” recovery. The swoosh (as in the Nike swoosh) recovery starts out like a V-recovery with a quick bounce, and then moves into a more gradual recovery over time.

Some economists are predicting that the COVID-19 recovery will be a swoosh because although the economy is opening back up, businesses, consumers and local governments are hesitant to spend so the return to our pre-crisis levels will take longer. Others have recently begun leaning more toward a K-shaped recovery.

Remember that as we all work through this unpredictable environment, we are open and ready to help.

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Jackie Kleinman, CFP™, is the principal of KB Financial Advisors. Jackie started her career in financial planning in 1996 at an insurance and brokerage firm. She enjoyed the client interaction, but was bothered by the conflict of interest inherent in commission planning. In 2002, as an advocate of fee-only planning, she opened her doors to assist clients in growing their wealth and enhancing their lifestyles by combining investment advice, taxes and setting each individual’s priorities and goals.


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