What next for the world economy?

Major global economies have been recovering from lockdowns more quickly than expected, but are we poised for a “V”, “U” or “W-shaped” recovery?

There is little consensus about which way the economy is heading as we embark on the second half of the year, says Lisa Beilfuss for Barron’s. Analysts have spent the last few months arguing over whether we are poised for a “V”, “U” or “W-shaped” recovery. More inventive types talk of “a Nike swoosh” and “a reverse square-root sign”. 

Major global economies have been recovering from lockdowns more quickly than expected, says Jonathan Allum in The Blah! newsletter. US employment remains in a hole, but news that a better-than-expected 4.8 million jobs returned in June suggests that things are on the way back to normal. Not to overdo the “horticultural metaphors”, but we have our “green shoots”, the question now is whether they will manage to grow into “fully fledged plants”. 

The surge in coronavirus cases in southern US states is the biggest threat. The epidemic still “has a long way to go”, Dr. Scott Gottlieb told CNBC; “we are now in the second wave”. Improvements in US retail traffic have gone into reverse. Authorities in affected states have once again closed businesses. The virus surge has put a “cloud” over the third quarter, says Mohamed El-Erian on Bloomberg. Another round of slumping activity will mean more downgrades to earnings forecasts. 

Daily life has changed radically in the last six months, but markets feel strangely familiar, says Jon Sindreu in The Wall Street Journal. Tech continues to beat out value stocks and large companies continue to gain at the expense of smaller ones. 

And as MoneyWeek regularly points out, central banks continue to step in with ever more lavish monetary support whenever investors throw a tantrum. As Sindreu puts it, “the more markets change, the more they stay
the same”.

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