The Vanna White Economic Recovery

Heartland Advisors

Listening to economists and the financial media forecast the road to economic recovery has begun to sound a little like a game of Wheel of Fortune.

Depending on the day and the latest datapoint, viewers can expect to hear an alphabet soup of economic trajectories–V, U, W are the most common.

A few prognosticators have even begun to throw in symbols such as check marks or square root signs to make their points.

The truth is the forecasts that fit with the letters are simply educated guesses and do little to inform investors on how businesses in the same industry may fare against their peers going forward.

We’re taking a more granular approach and focusing on the long-term health and earnings prospects of businesses.

The torrent of stimulus unleashed by the U.S. government has eased some of the damage brought on by the nationwide shutdown, but it has also kept afloat many zombie companies that were on the verge of foundering before the pandemic emerged.

As the chart below shows, those debt-laden businesses are likely to find it even harder to generate earnings as they labor under even greater debt payments.

non financial corporate debt as a percent of gdp chart image history united states

This article is by Will Nasgovitz, CEO and portfolio manager.

Disclosure: Past performance does not guarantee future results.

Investing involves risk, including the potential loss of principal. There is no guarantee that a particular investment strategy will be successful. Value investments are subject to the risk that their intrinsic value may not be recognized by the broad market.

The statements and opinions expressed in the articles or appearances are those of the presenter. Any discussion of investments and investment strategies represents the presenters’ views as of the date created and are subject to change without notice. The opinions expressed are for general information only and are not intended to provide specific advice or recommendations for any individual. Any forecasts may not prove to be true. Economic predictions are based on estimates and are subject to change. There is no guarantee that a particular investment strategy will be successful.

Definitions: Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis.

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