The coronavirus pandemic enters its fourth month, and the Western world is divided regarding how the economic recovery will take place. Many voices call for a V-shape recovery, while others are tempered by the mixed economic data coming out each week.
However, there is one optimistic view regarding the recovery, as Morgan Stanley economists expect a much faster recovery when compared with the Great Financial Crisis (GFC).
V-Shaped Economic Recovery According to Morgan Stanley
The economic business cycle is the one thing every economic forecaster tries to master. If traders correctly identify where an economy is on the business cycle, he/she can easily calibrate the portfolio so as to make the most of the opportunities ahead.
So far, the data since 2020 offered little incentive to cheer. Rising unemployment, increasing debt levels – not something to celebrate nor to be bullish about.
Yet, there is one company betting on a faster recovery than the data suggests. Morgan Stanley’s recent economic outlook points out that a new cycle may have started and that we deal with a sharper but shorter recession.
Let us not be delusional – the forecast does not refer to the next month or so. Instead, it refers to 2021, when a full 6.1% growth is expected globally, after a contraction in 2020 of -3.8%.
Morgan Stanley believes that consumers will adjust to the new normal much faster than anticipated. But the recovery does not depend only on the economic data – it also must consider the US election outcome.
The US-China trade tensions moved financial markets in the last couple of years before the coronavirus crisis, and the run-up to election day may very well be about the same theme. Market volatility is likely to increase and range trading to extend throughout the summer.
Optimism is the name of the game if judging by the Morgan Stanley’s 2020 midyear economic outlook. Are we in for a sharp recovery, or is it just unjustified optimism?
Time will tell.