Suppression of the virus appears to have reached its limits: as long as social distancing remains, economic recovery will be incomplete. Treatments are improving; the second waves are focused on the young who are more resilient; fatality rates are falling. But financial markets are pricing in a full recovery in corporate earnings and as things currently stand that will not be the case.
UK recession worst for Q2, but all is not as it seems: The OECD has reported that the UK’s GDP fell the fastest in the world in Q2 – we have had the worst recession on that measure. But that owes much to the unusual way we’re measure health care prices. The truth is that our recession probably wasn’t very different from the European average.
The odds of a Democratic ‘clean sweep’ have increased: that could usher in an anti-business administration with higher corporate taxes, higher income taxes on the wealthy, greater regulation, including even the break-up of Google and Facebook, but the race is far from over.
Positive news on the virus, but markets yet to price this in: just how radical a mass vaccination programme would be is only just beginning to dawn on financial markets. We need a vaccine to move ahead – and that would be positive for risk assets.