A recent RIAIntel article profiles NYU business school professor Aswath Damodaran and offers excerpts from an interview in which he discusses the state of the economy, FAANG stocks and the post-pandemic outlook.

Here are highlights from the interview:

• The U.S. economy, according to Damodaran, is “in trouble. Closing down the economy is an experiment that the world has never tried…the fear is that the economic engine might not start up or sputter for a while.” He adds, however, that the U.S. has the advantage of big tech stocks, “which have been thriving and represent a larger segment of the market.”
• When the economy does start back up, says Damodaran, “Some of the largest companies are going to get even stronger and bigger, but at the expense of smaller, weaker competitors. This should allow the U.S. economy to come back faster than the rest of the world,” he said, but will lead to a “top-heavy economy, dominated by big winners.”
• The coronavirus pandemic “actually mirrors the virus: it has punished older, more mature companies that used to pay healthy dividends, and it has rewarded younger, more flexible companies that don’t pay dividends.” Damodaran adds, “That’s almost never the case during a crisis.”
• The biggest market risk, he says, is “if the release of an effective vaccine is delayed and consumer and business confidence drop.”
• Regarding GDP, Damodaran is expecting a decline of between 10 and 20%, adding that his projection depends on how the last quarter plays out: “I just get a sense that more people are showing greater mobility, they are in stores, and that economic activity is growing. I think we’ll see a Christmas bonus.”
• On the Fed’s response to the crisis, Damodaran says, “we already have to be wary about how much money has been thrown at this problem,” adding that the key question will be if the Fed knows when to stop fueling money supply and “start reeling it back in.”
• Regarding opportunities for investors, Damodaran identified the Chinese and Vietnamese markets as strong, but added that over the long term, I think winners and losers will be seen more in terms of sectors rather than countries.” He expects an “accelerated shift away from less flexible, traditional industries, like steel, oil and coal, into more flexible companies.”
• Damodaran does not foresee a banking crisis at the moment (although their stocks are down more than any other sector) because risk capital has “stayed in play” during the shutdown. 
• “If the virus comes back and the economy shuts down for any significant time, I don’t see how you avoid a debt crisis,” says Damodaran, “But I don’t believe there’s going to be a severe second wave that will shut  down the entire economy.”