Vaccine development would be the most powerful contributor to a full economic recovery, followed by governments’ stimulus policies, UBS Asset Management said, adding that it expects the global economy to return to the levels of before the COVID-19 pandemic by mid-2022.
“We believe that the most powerful determinant of economic recovery will be the development of a still-elusive vaccine or proven treatment protocol,” Evan Brown, head of multi-asset allocation strategy at UBS Asset Management, said in a report on Monday.
In addition to breakthroughs in the medical field, public policy decisions would be instrumental in deciding which character defines the shape of recoveries — be it V, U or swoosh-shaped, Brown said, adding that a swoosh-shaped recovery is most likely in his view.
Investors should prepare for it to take until 2022 to re-establish the economic levels seen at the end of last year, UBS Asset Management said in the report.
Risk assets around the world have enjoyed substantial rallies since late March, but lingering safety concerns would likely keep demand and capacity below pre-pandemic levels until 2022, Brown said of the company’s base-case scenario.
There is an upside scenario in which a faster-than-expected arrival of an effective vaccine allows for a comprehensive economic reopening, with governments turning to stimulus spending, he said.
Capital spending is likely to remain in the doldrums in this highly uncertain backdrop, and the scope for households to reduce saving rates is limited, the report said, adding that recoveries would be gradual but uneven among different countries and sectors.
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