Consider this: The Fed has been proactive during this crisis. Trillions of dollars are being injected into our economy and markets at record speed. Payrolls are being backed so employees aren't laid off. Those laid off are receiving unemployment checks with a $600-per-week bonus. Those making less than $50,000 per year actually make more money by taking unemployment benefits than they would on the payroll. I'm sure you've all heard the Wall Street quote "Don't fight the Fed." Well, it's true. With the Paycheck Protection Program and other stimulus, my sense is that we could come out of this quickly as the restrictions begin to lift.
Look for another Cash for Clunkers program, too. During the recession, Uncle Sam paid people to trade in old cars for new ones. The program was very successful, as $3 billion of stimulus generated $14 billion of sales. Morgan Stanley believes $10 billion will be provided this time, and it will generate $50 billion in sales.
Here are 8 reasons for pre-owned optimism:
1. Interest rates are basically at 0 percent.
2. Automakers and lenders are offering fantastic incentives.
3. Factory shutdowns result in a short new-car supply, shifting demand to nearly new.
4. Gasoline prices are at lows we've not seen in decades, which will drive light-truck sales.
5. People have not been able to take vacations, go shopping or go out to dinner. If they've been able to maintain a relatively stable level of income, they will have money to spend.
6. Demand for shared mobility and rentals will wane as people will feel safer in their own vehicles.
7. A Cash for Clunkers-type program could stimulate $50 billion of sales.
8. States are beginning to reopen for business.