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JPMorgan’s prospect for V-shaped global recovery
Morgan Stanley analytics forecast the economy will return to pre-crisis levels by the fourth quarter. Here’s why.
What is V-shape recovery?
Economies can recover from recessions in different ways. The V-shaped recovery is just one of them and it’s the best one for any country. It’s called “V” as it resembles a "V" shape in a chart. An economy drops to its lowest point and then bounces back to its normal as soon as causes of the recession pass away. Economic activity will regain as nothing has happened.
Why will V-shaped recovery happen?
JPMorgan’s economists have three reasons to be so confident in the upcoming V-shaped recovery. The first one is recent upside surprises in growth data. US non-farm payrolls, unemployment claims and consumer sentiment turned out much better than analysts anticipated. Also, the Chinese trade balance has beaten all expectations too. The second reason is government measures to support economies. Central banks injected unprecedented amounts of money to stimulate the economic activity and they are not going to ease anytime soon. Finally, the current crisis is not an endogenous shock triggered by huge imbalances. When the coronavirus passes, economies will rebound quickly.
They even take into account developments with the vaccine. In their base case, the second wave of infections will occur in autumn, but it will lead only to selective lockdowns and results will be manageable and a vaccine will broadly be available by summer of 2021. In their bear case, if the world reenters strict lockdowns again, the global economy will experience a double-dip or the W-shaped recovery.
This is the JPMorgan’s forecast in numbers: the global GDP growth will contract by 8.6% year on year in the second quarter and recover to 3.0% by the first quarter of 2021.
Fed’s uncertain outlook
The Fed is not so optimistic about the future recovery as JPMorgan. Last week the Fed warned that the global economy would rebound more slowly than expected. Moreover, the fresh coronavirus outbreak in China and resurgence of new cases all over the world raised fears among investors. The second wave has become the hotly debated topic these days. In addition, analysts from Morgan Stanley mentioned that the increasing debt and deficits may push governments to reduce their massive fiscal stimulus. However, governments aren’t going to do so yet. Follow the news further!
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The Federal Reserve (Fed) will announce its Interest Rate Decision and make a statement about the future monetary policy on Wednesday, September 21, GMT+3. After the higher-than-expected inflation numbers published on September 13, there’s almost no doubt the Federal Reserve will come up with another 75-basis-point rate hike. However, surprised by the CPI numbers, several Fed members announced the possibility of a 100-basis-point rate hike on Wednesday.
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Hello, dear traders! We hope you have a great day! Let’s see what news is worth following today! Market closing US stock exchanges will be closed due to the Thanksgiving holiday…
Today, two events will shake the US dollar. First, at 16:45 GMT+2, Markit, a statistical company, will release the US Flash Services PMI. Moreover, at 21:00 GMT+2, the Federal Reserve will release its meeting minutes.