Making money: what the experts think
● Tick vs. stick Few people now expect a V-shaped economic recovery, said Andrew Ross Sorkin in The New York Times. But the concept of “a more prolonged U-shaped recovery is also falling out of favour”. Instead, the challenge is on to depict what “a steep initial fall” followed “by a long drawn-out recovery over a year or more” might look like. Nike’s “swoosh” logo has become the “go-to descriptor” for many. Deutsche Bank’s chief economist has even suggested that a “swoosh recovery” is appearing in data on restaurant bookings. Others prefer what Americans call a “check mark” and the British call a “tick”. But the CFA Institute, which represents some 13,000 investment professionals, “uniquely positioned to opine what the economic recovery might look like”, has gone for a hockey stick. In other words, “some form of stagnation for 2-3 years before a steady pick-up”.
● India’s “Modi Vaccine”
“With characteristic dramatic flair”, Narendra Modi “dazzled Indians last week with promises of a $266bn package to stimulate the economy – equivalent to 10% of the country’s GDP, said Amy Kazmin in the FT. The business press dubbed it a “Modi Vaccine” and jubilant investors pushed up Mumbai’s Sensex index by 2% in anticipation. But oh dear, what a damp squib. When details of the revival plan were finally revealed, it became clear exactly how little was on offer. “Far from a bold stimulus to cushion households and businesses from a severe income shock, New Delhi is extending minimal support.” Economists say the true value of the stimulus is between 1.5% and 1.8% of GDP – “a far cry from Modi’s promises”. No wonder the Sensex dipped 3.4% on Monday – while most other stock markets rose – “as investors registered their dismay”.
● Shrinking prospects
So much for the short-term reaction. But is India a good home for investment cash, long-term? Goldman Sachs doesn’t think so. Noting that India’s revival measures are “tepid compared with other emerging markets and far less than advanced economies”, it is now predicting that India’s GDP will contract 45% quarter-on-quarter from April to June, and by 5% over the full financial year. Given the general confusion, there may be better places elsewhere in which to see this crisis out.