The recent improvement in global PMIs and especially in employment in the United States have created a strong optimism in markets about the recovery. However, it is important to be cautious about a V-shaped recovery when the leading indicators remain weak.
Continue reading A Bounce Is Not A RecoveryAll posts by Daniel Lacalle
Why The European Recovery Plan Will Likely Fail
The 750 billion euro stimulus plan announced by the European Commission has been greeted by many macroeconomic analysts and investment banks with euphoria. However, we must be cautious. Why? Many would argue that a swift and decisive response to the crisis with an injection of liquidity that avoids a financial collapse and a strong fiscal impulse that cements the recovery are overwhelmingly positive measures. History and experience tell us that, indeed, the risk of disappointment regarding the positive impact on the real economy is not small.
The history of stimulus plans in the eurozone should alert us against excessive optimism.
Continue reading Why The European Recovery Plan Will Likely FailAn “L”-Shaped Recovery Is Not An Anomaly, It Is The Norm.
Many analysts and economists are trying to predict the shape of the economic recovery post-Covid-19. To understand how the recovery may look like, we need to look at past recoveries and at the history of pandemics.
Starting with the pandemic, we know a few things. First, there has never been a vaccine for any of the previous 18 Covid types. Second, there has never been a pandemic without a second wave before a treatment existed. Taking both things into account, the idea that many investors have that the worst is discounted may be overoptimistic.
Continue reading An “L”-Shaped Recovery Is Not An Anomaly, It Is The Norm.Global Investors Demand Gold As Protection Against Financial Repression
Daniel Lacalle, IG Trading the Markets, May 20, 2020
Podcast links:
- Apple: https://apple.co/2Xh2oGe
- Google: https://bit.ly/3cK01Cp
- Spotify: https://spoti.fi/2TriE6p
Disconnect between markets and economic reality:
“There is a huge disconnect between markets and the economic reality, and it’s fundamentally based on the view that 2020 is a lost year and therefore what investors need to think about is 2021 is a recovery year. It looks a very dangerous bet to me because if there’s anything that we have learned from this crisis is that estimates for 2021 remain excessively optimistic, and that the V-shaped recovery is more than elusive.”
Continue reading Global Investors Demand Gold As Protection Against Financial Repression