Deutsche Bank explores how COVID-driven shocks are reshaping markets, arguing the recovery will look more like a drawn-out “swoosh” than a sharp rebound. It highlights stabilizing financial conditions despite severe economic damage, while controversially suggesting deflation risks outweigh inflation for years ahead.
Global Macro Outlook: Virus Curve Flattening, Markets Stabilizing, Slow Recovery
Deutsche Bank
Torsten Slok
Research
200 Pages
Key Takeaways
Swoosh Recovery Path: GDP contraction reached roughly -8.5% q/q annualized, with recovery expected to stretch over multiple years rather than a rapid V-shaped rebound.
Credit Market Expansion: US credit markets grew from $2 trillion in 2008 to $7 trillion in 2020, driven heavily by BBB-rated issuance now comprising about 50% of IG indices.
Deflation Dominance Risk: Around 90% of government bonds yield below 1%, reinforcing the view that inflation pressures may remain subdued for an extended period.
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