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”.

Recommended

The coronavirus is scary – but it's irrelevant to your investments
Investment strategy

The coronavirus is scary – but it's irrelevant to your investments

The spread of the coronavirus is causing alarm around the world. And, while it could be a serious short-term threat to human health, it’s not somethin…
24 Jan 2020
The charts that matter: a correction for gold and better news on US jobs
Global Economy

The charts that matter: a correction for gold and better news on US jobs

Having ended on a record high last Friday, gold took a big tumble this week. John Stepek looks at the gold price chart, along with the others that mat…
15 Aug 2020
What "peak meat" tells us about forecasting
Global Economy

What "peak meat" tells us about forecasting

When it comes to warnings of societal change, it's best to take them with a big pinch of salt, says John Stepek.
13 Aug 2020
If companies have too much power, we need more competition, not higher taxes
US Economy

If companies have too much power, we need more competition, not higher taxes

Free-market capitalism is breaking down and that is going to lead to higher taxes down the line. John Stepek explains why that matters for investors.
11 Aug 2020

Most Popular

No, the UK did not “plunge” into recession yesterday
UK Economy

No, the UK did not “plunge” into recession yesterday

That the economy took a massive hit due to Covid-19 should be news to no one, says John Stepek. The real question is what happens now.
13 Aug 2020
Inflation spiked in the US last month – is this the shape of things to come?
US Economy

Inflation spiked in the US last month – is this the shape of things to come?

Prices in the US rose much more dramatically than expected in July. Can we expect more of the same, and what does that mean for your money? John Stepe…
14 Aug 2020
The MoneyWeek Podcast: house prices, staycations, and the death of cash
House prices

The MoneyWeek Podcast: house prices, staycations, and the death of cash

John and Merryn talk about the rise in UK house prices and the fact that everybody is holidaying in the UK, plus gold's new highs, the death of cash, …
12 Aug 2020