Buckle up. This is it. We are about to find out if our damaged global economy will shift into a sharp recovery or, rather, if a long and relentless recession lies ahead. June will deliver answers.
The initial COVID-19 outbreak has now swept the planet, and the economic readings so far have mainly measured the breadth and depth of the wounds. Ghastly readings on industrial production, unemployment and table bookings were — in some cases literally – off the charts. Over the next few weeks, the sharpest investors will be watching for the second waves of the disease, second waves of macro data and second waves of corporate earnings. All three sets of readings will begin to deliver a sense of the early recovery rather than a measure of the global lockdown itself.
With much of the supply side coming rapidly back on line, the biggest questions remain around how quickly demand will return. The likeliest answers will paint a highly differentiated picture across regions, industries and companies. Currently, the outlook is much better in Asia than in Europe and the United States and brighter for industries such as health care and technology than it is for retail and leisure.
But June will confirm or confound these expectations. We should not be surprised to be surprised.
The second wave of infections will clearly be most important. The base case remains that a relaxation of government restrictions on movement in recent weeks will lead to isolated, but manageable, outbreaks. Still, we should retain some humility about just how little we know about COVID-19 itself, how it spreads and who is vulnerable.