While this comes as a relief, this was in all likelihood the ‘easy’ part of the recovery. We are now entering the second phase, where any new gains will be incrementally smaller – and governments will have to do more than reopen shuttered parts of the economy to stimulate growth. Already, manufacturing and service sector data for China and Europe – which are ahead in the coronavirus cycle – show activity is beginning to plateau.
It is time for investors to forget the heady rush of recovery and embrace the new reality – or, more accurately, the old reality. Prior to coronavirus, the world had already entered a new era of ‘Japanification’, characterised by low single digit growth and low inflation.