Morgan Stanley Cross-Asset remains confident in a V-shaped recovery amidst the resurgence in Covid-19 cases, continuing to believe the global economy will regain its pre-Covid levels in four quarters
1. social distancing should be less of a drag on overall consumption spending than expected, given consumers have adapted – dollars not spent on travel / dining out are being redirected to other categories.
2. the link between the labor market and consumption is looser than commonly thought. For example, US consumption had already recovered to pre-recession levels by 3Q’10, even though the unemployment rate remained just 50 bps off its peak at 9.5%.
3. policy will continue to drive the recovery, with the US likely enacting an additional $1Tn in fiscal stimulus. Base case assumes a 2nd wave of Covid cases in the Fall / Winter, but believes public health systems will be better positioned to manage at this point
1. social distancing should be less of a drag on overall consumption spending than expected, given consumers have adapted – dollars not spent on travel / dining out are being redirected to other categories.
2. the link between the labor market and consumption is looser than commonly thought. For example, US consumption had already recovered to pre-recession levels by 3Q’10, even though the unemployment rate remained just 50 bps off its peak at 9.5%.
3. policy will continue to drive the recovery, with the US likely enacting an additional $1Tn in fiscal stimulus. Base case assumes a 2nd wave of Covid cases in the Fall / Winter, but believes public health systems will be better positioned to manage at this point