Macro Zeitgeist

April 23, 2021


Downside risks and uncertainties are always writ large when we consider the potential future path of growth. Today, those risks and uncertainties coalesce around the question of hysteresis: that is, whether the economy’s ability to generate growth has been permanently impaired by the events of the past 12 months.

What we can say from current data is that it’s too early to say. On the one hand, unemployment data is clearly a cause for concern and consumer confidence has understandably taken a hit. Yet this is coupled with tremendous pent-up demand and elevated savings rates across the world’s major economies.

Meanwhile, we’ve seen a broadening out of the recovery in markets, with equities in particular moving beyond the initial surge in technology stocks to now embrace value, small caps and cyclicals.

Overall, I tend towards an optimistic outlook. Even if the composition of the world’s economy has been transformed by the pandemic, that doesn’t necessarily equate to a permanent backwards step in its overall ability to generate growth. My view is that, while some sectors may have suffered – think travel and leisure, for example – others have thrived though lockdown and are now well positioned to take up the slack.

Shamik Dhar, chief economist, BNY Mellon Investment Management.

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