How far from normal?
Paul Jackson. Global Head of Asset Allocation Research and András Vig. Multi Asset Strategist
Global stocks are back to where they were in January, many economies have rebounded and Covid-19 infections and deaths seem to have flat-lined. Are we approaching normality?
To answer this question we review some old metrics (Covid-19 data by region, latitude and age structure, along with mobility and stringency indices versus economic growth). We also add some new measures, including a health versus wealth trade-off and positive rates.
The good news is that global daily cases and deaths seem to stabilising and economies have rebounded. The bad news items are that easing of lock downs seems to provoke more infections, that the Northern Hemisphere winter will soon be upon us and that many of the government measures to support corporate and household cash flows will soon end.
Though the worst economic performance may be behind us, we worry that collateral damage is only now being revealed (see UK job losses as furlough schemes end, for example). Further, even if lock downs are now localised rather than national, it is hard to imagine a smooth recovery path from here.
Hence, we are worried that economic momentum will no longer provide unstinting positive support for cyclical assets (as it has done since early April), which argues for a diversified model asset allocation.
For our more in-depth assessment click here.
