2021 GDP Estimates Low, Despite Positive Vaccine News

The equity markets around the world had plenty of reasons to celebrate this November. Each Monday in the first three weeks of the month brought positive vaccine news. 

At the start of the month, it was Pfizer and BioNTech. Next, Moderna. Finally, AstraZeneca. They all revealed promising results in the fight against the virus, with their vaccines showing so far, a good enough efficacy to end the pandemic.

As a result, the stock markets made new all-time highs. It was the first logical reaction during this crisis. Up until this point, the stocks were on “steroids” from central banks. Cheap money fueled the stock rally, no matter if the news coming was bad to scare everyone. Finally, good news triggered a positive market reaction.

However, now that the euphoria is behind us and the dust settled a bit, some interesting things are worth mentioning. To start with, the GDP estimates for 2021 remain unchanged despite the vaccine news. How come?

The Roaring 20s Are Back Again?

One interesting take about the year/years to come is a comparison with the 1920s. Back in the day, the “roaring 20s” was the nickname for the years that followed World War I and the Spanish Flu. Can we have another boom as in those 20s, this time a century after? I mean, if history repeats itself, the comeback from the COVID-19 shock should be nothing short of spectacular.

Let us consider the conditions. To start with, credit expanded like never before – both public and private institutions extended their debt. On the other hand, credit has never been cheaper. Therefore, for anyone with an idea to invest, or willing to take a risk during the pandemic, such conditions are likely the best ones to be found in a lifetime. In some cases, central banks offered loans under negative interest rates!

Armed with money, ideas, and unrestricted mobility (assuming vaccines do their job), the world’s economies will roar back. People will spend more on leisure travel and apparel, led by a relief rally.

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Disclaimer: None of the content in this article should be viewed as investment advice or a recommendation to buy or sell. Past performance/statistics may not necessarily reflect future ...

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