- While the exit from the lockdown is proceeding cautiously, Covid-19 appears tenacious; the number of new cases globally has slightly picked up over the past week.
- We go back to history and look at the shape of recessions and recoveries. From peak to trough, the US GDP is set to lose at least 13%, vs. “just” 4% through the 2008-09 Great Financial Crisis (Euro area -14% vs -6%).
- The shape of the recovery matters both socially and financially. The ‘swoosh’ recovery does not bode particularly well for cyclicals assets.
- Arguably, unprecedented central bank actions will support elevated equity multiples. The balance sheet of G4 central banks will grow as much this year as between 2008 and 2016.
- The liquidity splash and limited appetite for risk (typical in post-traumatic periods) will support assets offering some yield but a contained risk profile, such as Investment Grade corporate bonds, non-cyclical sectors, growth stocks and residential property..