Contraction > recovery > late cycle: a cycle round trip in three years

The pandemic outbreak altered the cycle of financial regimes we had in mind at the end of 2019, with consequences extending over the medium term: after a sharp contraction in 2020, 2021 will see a “recovery” in the growth and profit cycle with a rebound in risky assets while in 2022, we expect a normalization towards a late cycle.

The geographical impact of the pandemic has extended globally over time, quickly evolving from an external shock to trade dynamics sourced in China to an endogenous shock of collapsing demand in most countries experiencing forced shutdowns.

While different timelines of the outbreak and related containment measures suggest a jerky recovery, with the risk of possible setbacks should a second wave of epidemic/lockdown occur, single economies are facing double shocks, both domestic and external.

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