Buoyant markets face critical period as hopes pinned on normalisation of earnings
If the global economy falls into a deep recession, the decline in profit margins and profits will have a severe effect
Covid-19 continues to wreak havoc worldwide, with virtually no area of economic and social activity left unscathed. However, the likelihood of a worst-case cataclysmic scenario is rapidly diminishing, and if there is a “second wave”, governments are unlikely to reimpose harsh lockdowns given the challenges of severe financial cost, public acquiescence and effectiveness.
Markets have mostly behaved rationally since the pandemic emerged, but their future direction hinges on the depth, longevity and scarring of the recession, valuation distortions and geopolitical considerations such as the US election and heightened tensions between the West and China...
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