In this note I list my top three risks of V (fast) and U (slow) shaped recoveries. On balance, V seems more probable, mainly due to the US electoral calendar.
Top 3 Risks of V-shaped Recovery
Risk #1: The November elections generate ‘whatever it takes’ policy support. The scale of monetary and fiscal relief is unprecedented. Yet the administration has other levers it could use, for instance a broader debt moratorium or central bank digital money to ensure the economy is recovering ahead of the elections.
Risk #2: A cure or a vaccine is identified. In view of the unprecedented global resources and of recent progresses in AI and biotechnologies, a credible cure or vaccine could emerge by year end. In any event, the current drip of positive, if early stage, market-supportive news will probably continue.
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