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Bet on coronavirus recovery could go well


The market seems to have been right for the pandemic. Stocks plunged as economies were constrained to give way Strong demonstrations: investors believe in the combination of vaccines, corporate adaptation and central bank stimulation. Mass Immunization program in the US and Europe is underway and in the countries where they are most advanced like Israel and the UK, the economy is unlocked and the customer has arrived back to the stores and restaurants.

Viruses take advantage of our social nature to spread, but markets have another trait, no less human, in mind: ingenuity. That includes tech companies whose stocks are among the big winners as they keep businesses active during downtime and new business models that allow shoppers to continue spending. pepper. Others, too, have adapted and the door lock has become less damage.

Even more important is pharmaceutical innovation. Research and vaccine development which, likely, has yielded the greatest return on investment for any human activity – as production accelerates, demand is limited, at the respective economic costs, in retreat. The next challenge – politics rather than science – is to guarantee share enough to make their way to poor countries.

With little experience with the pandemic, policymakers have looked into the financial crisis. Fresh memories of what was in many countries during a “lost decade” with meager improvements in living standards, central banks pushing and flood open government. Unprecedented monetary and fiscal stimulus has been noted in terms of its speed and size relative to the response in 2008, reducing long-term losses: massive US spending, in particular, further refines. whether for the demonstration and the stimulus tests were Retail investors are allowed join.

Claiming victory would be a mistake. Pandemic is a story of reversal and countries that once seemed to have control of the virus find themselves overwhelmed. That includes, for example, Germany – praised for its early response but grappled with the third wave – or Eastern Europe, initially less affected than elsewhere but now among the most severely affected areas. Other countries that reopened in the past must quickly close again as the new wave spreads.

In 2009, the main US index rose 66% in 12 months after bottoming out but it took much longer, and successive crises in the eurozone, before the economies complete recovery. Investors who participate in the rally soon will have no regrets: the cheap money has helped create strength The bull market lasted for a decade. The same goes for this recovery as investors have learned that very little profit will be gained from applying quantitative easing.

The big question remains inflation outlook. With few signs of economies returning to capacity after the financial crisis, central banks keep interest rates low and asset purchases at high levels, flooding the financial system with liquidity. A stronger recovery from the pandemic, thanks to a combination of government stimulus and cumulative household spending savings could cause prices and wages to start rising again – banks Central row may also begin to withdraw support. The pandemic has also disrupted supply chains, increasing price pressures.

Record first quarter growth in China, where the rebound is more advanced, has shifted the focus to “overheating” and the prospect of a rate hike. Ending persistent “low inflation” in the decade after the financial crisis would be a much better outcome worldwide, but it could mean markets have taken the lead.

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