Pride (and prejudice) before a fall
1) Re-opening economies will mechanically rebound by an amount proportional to the previous depression
2) The supply-side damage is likely to be far worse than most recognise, delaying recoveries
3) Covid is suppressed in the West, but record-high global cases and vaccine-evasive mutations mean the risk remains
4) Monetary policy's accommodation of fiscal stimulus is its main current channel of supporting GDP
5) Excessive stimulus in the US need not fully spill over into European inflation
The recovery from re-opening will not undo the damage done.
1) Lockdowns will leave a painful legacy, with brisk mechanical rebounds falling far short of full recovery.
2) Fear of vaccine-resistant strains mean activity restrictions remain part of the policy toolkit
3) Monetary policy lacks the power to stimulate activity independently of fiscal policy
4) De-globalisation continues with the populist pursuit of supply chain independence
Output suffers from restraints while inflation distortions echo.
1) Vaccination success is moving the market but not activity restrictions or relative performance. The long-term pain will be severe, with recent savings not splurged.
2) HICP will continue to be distorted by the new weightings, mostly to the downside after the Jan-21 surge, with the Consensus set to be regularly surprised.