Riding the central bank stimulus

Dollar Bills Printing

The major issues today are how fast the recovery will be, how widespread will it be, and how much permanent damage will remain.

Bulls in the stock market are excited by the recovery cycle. It now looks as if all the major economies have passed the worst of their troughs in output and incomes brought on by lockdowns and social distancing policies. An issue today is how fast the recovery will be, how widespread will it be, and how much permanent damage will remain.

Optimists still think there can be a near V-shaped recovery, getting back to previous levels quite quickly. Pessimists think it will take time, with large sectors like travel, shop retail, tourism and hospitality not getting back to previous levels of activity this year or next.

There has been a V-shaped recovery in some stock markets, led by the US. Others are still below their March peaks, hesitant owing to the mix of companies and investments in their indices. An index that has plenty of technology, food, healthcare and other basics has been doing better than one with plenty of banks, retail, oils and cyclical industry. Governments around the world have decided they need to offer subsidy and support to foster faster recovery and to avoid further rises in unemployment and bankruptcies. Central banks have been very accommodating, sure that inflation is not an immediate problem but the collapse in output is.

View Full Article ā€“ published by Charles Stanley on 20th August 2020