Uneven recovery - Monthly macro forecast

Risk appetite is rising, but most investors are still confident about the future. Assuming the recovery is on track, more and more investors are looking for high-value investment opportunities. It is undeniable that there are signs of recovery, but it is clear that the problems are not over yet. We can all agree that we have entered a K-shaped recovery stage, which means that in the coming months the pace of economic growth will most likely become increasingly differentiated by country, sector or company. Some will benefit from unprecedented fiscal and monetary stimuli - large enterprises and the richest in particular - while others - most often small businesses and service workers - face the risk of slow growth, bankruptcy and poverty.

About the Author

Christopher Dembik - French economist of Polish origin. Is a global head of macroeconomic research at a Danish investment bank Saxo Bank (a subsidiary of the Chinese company Geely serving 860 HNW customers around the world). He is also an advisor to French parliamentarians and a member of the Polish think tank CASE, which took first place in the economic think tank in Central and Eastern Europe according to a report Global Go to Think Tank Index. As a global head of macroeconomic research, he supports branches, providing analysis of global monetary policy and macroeconomic developments to institutional and HNW clients in Europe and MENA. He is a regular commentator in international media (CNBC, Reuters, FT, BFM TV, France 2, etc.) and a speaker at international events (COP22, MENA Investment Congress, Paris Global Conference, etc.).

China: Slow but steady recovery of economic growth

There have been further signs of economic recovery in China in recent weeks. The latest Chinese PMI reading confirms widespread expectations for the health of the Chinese economy by the end of this year: a slow but steady return to higher growth, mainly fueled by increased public sector investment in fixed assets and foreign capital inflows. Exports from South Korea to China, which are often considered by market participants as an indicator of growth in the Middle Kingdom, surprised positively: on September 1-20 it increased by as much as 8,7%. This is another important signal that not only China's outlook is gradually improving, but also that of other Asian countries, due to increased demand for microprocessors and semiconductors, as demonstrated by the latest trade data in the region.

Successful containment of the pandemic in Asia (with some notable exceptions such as India) has managed to unleash the full potential of all the fiscal and monetary stimuli implemented in recent months to deal with the crisis.

Rest of the world: uncertainty prevails

For the rest of the world, the outlook remains negative. In many countries, recovery stalled in August and September, and Europe is now struggling with a second wave of Covid-19, raising doubts about the Northern Hemisphere's ability to tackle both the seasonal flu and pandemic in the coming months. Governments will certainly try to avoid a full lockdown at all costs, but in the short to medium term it is possible to isolate at the local level and / or implement stricter social distancing restrictions. Rather inevitable actions of this kind will have an even more negative impact on economic recovery, in particular in the sectors and companies most affected by the spring lockdown.

In recent months, economists preoccupied with the alphabet have debated the possible shape of the recovery. We can all agree now that we are dealing with a K-shaped recovery, which means that in the coming months, economic activity will increasingly diversify on a macro- and micro-economic level depending on the sector or company.

Under this scenario, some will benefit from unprecedented fiscal and monetary stimuli, while others face the risks of slow growth, bankruptcy and poverty. In the post-pandemic world, the winners will most likely be large-format stores, American banks, and above all technology and internet companies.

According to a recent article by Gompers, Kaplan et al., The negative impact of the pandemic on venture capital-based companies (most often in the technology and digital industries) was relatively small. According to VC funds, Covid-19 had a positive or neutral impact on 52% of their portfolio companies, and only 10% were severely affected by the pandemic. At the other end of the spectrum are small and medium-sized enterprises, particularly in the service sector. In many countries, they have not been able to recover from the pandemic as quickly as large enterprises. In many cases, the ability to build on and exploit the digital economy has been a key determinant of dealing with the impact of a pandemic. Companies unable to accelerate the digital transformation cannot count on a quick recovery from a crisis (typically the travel industry, which is often unprepared for the digital future) and will require public support for longer than anticipated; otherwise they will face bankruptcy.

Calendar for October 2020:

• Beginning of October: British Conservative Party Virtual Conference.
• 2 October: Report on Non-Farm Employment (NFP).
• 7 October: vice presidential debate in the United States.
• 14 October: Start early voting in selected states.
• 15 October: the second presidential debate in the United States; the European Council on Brexit (described by the Johnson government as a "soft deadline" for reaching an agreement).
• 22 October: the last presidential debate.
• 24 October: start a personal vote in Florida in advance.
• 29 October: meeting EBC. The status quo is expected to be maintained.