The Monday Briefing
A succinct and eclectic weekly take on economics and finance from Ian Stewart, Deloitte's Chief Economist in the UK
Global slump, equity boom
Strange though it might seem, amid the greatest economic downturn since the Depression, equities have soared. Markets had a dreadful start in 2020. The dawning realisation that the world faced a global pandemic triggered a crash, with global stocks losing a third of their value in the five weeks to 23 March. Since then, equities have staged a comeback, rising by 70% and shrugging off a rising death toll, the discovery of new, more contagious variants of the virus, further lockdowns, Brexit and America’s political turmoil. The world economy is significantly smaller today than it was a year ago, while global equity markets are 12% higher.
So why, late last March, on the verge of one of the largest downturns of modern times, did investors start to buy equities, and why have they continued to do so?
The answer lies in the aggressive response of governments and central banks to the pandemic. By cutting interest rates and undertaking more quantitative easing, central banks have poured liquidity into the system and boosted equity values. (A lower discount rate increases the present value of a future stream of dividend income and so raises equity values.) Massive government spending has supported jobs, incomes and companies, mitigating the damage to the economy from the recession. With governments and central banks apparently prepared to print money and borrow and spend without limit, growth, and profits, so investors reason, are bound to come back.
Prospects for 2021
New year, new lockdown, new vaccines. Join our webinar on 14 January at 13:00 GMT where Ian Stewart and Karen Taylor will assess the effect of the new COVID-19 variant and the roll-out of vaccines on public health and the economy in 2021. We will also be joined by Ben Perkins, head of Insight & Marketing, Consumer, Deloitte to provide analysis on the latest consumer market data.
Register here: https://event.webcasts.com/starthere.jsp?ei=1365454&tp_key=8f4d835e66&sti=mmb
Beyond Brexit
On Monday, 11 January, at 12:00 GMT I will be joined by Deloitte’s CEO for North and South Europe, Richard Houston, to discuss what 2021 holds for the global economy and for business. Register here: https://event.webcasts.com/starthere.jsp?ei=1407909&tp_key=ece03b000a
And finally…
Here, to mark the start of the Christmas week, are 12 of our "And finally" news stories from the Monday Briefing in 2020. The Monday Briefing is taking a break until Monday, 4 January. In the meantime, the Deloitte Economics team wishes you a merry Christmas and a happy New Year.
A Christmas reading list
It seems a long way off but you may wish to register now for our 2021 “Year-ahead webinar” on Monday, 11 January, at 12:00 GMT. I will be joined by Deloitte’s CEO for North and South Europe, Richard Houston, to examine prospects for the global economy and the many ways in which the pandemic will reshape business and society.
Register here: https://event.webcasts.com/starthere.jsp?ei=1407909&tp_key=ece03b000a
Christmas quiz
Our Christmas quiz offers an eclectic test of knowledge, only some of it related to economics and business. The answers and a brief explanation of the factors at work are at the end of the quiz.
1. Which US corporate popularised today's image of Santa Claus as a rotund, red-suited, jolly old man?
a. McDonald's
b. Hallmark Cards
c. Coca-Cola
Is the economic emergency beginning or ending?
Join our next fortnightly COVID-19 webinar on Thursday, 3 December, at 13:00 GMT. We will discuss the impact of COVID-19 on the future of the city and what this means for the high street. Register here: https://event.webcasts.com/starthere.jsp?ei=1365454&tp_key=8f4d835e66&sti=mmb
The pandemic and climate change
At the start of this year our plan was that today’s briefing would cover the outcome of the UN Climate Change Conference, COP26, which was due to end last week. Hosted by the UK in Glasgow, it was set to be a landmark in international efforts to reduce carbon emissions. Like much else it has succumbed to the pandemic, and will now take place next November. COVID-19 has forced the conference’s postponement but it has also generated new momentum on climate change. Six recent announcements testify to the gathering pace of change.
The UK’s shrinking migrant workforce
Join our next fortnightly COVID-19 webinar on Thursday, 19 November, at 13:00 GMT. We will examine how the pandemic has affected government, corporate and public focus on climate change. Register here: https://event.webcasts.com/starthere.jsp?ei=1365454&tp_key=8f4d835e66&sti=mmb
Deloitte Monday Briefing: US elections, UK lockdown
Faced with choosing to write about the US elections or the lockdown in England in this week’s briefing we are doing the obvious thing and covering both.
The age of government activism
Join our next fortnightly COVID-19 webinar, focussing on building resilience, on Thursday, 5 November, at 13:00 GMT: https://event.webcasts.com/starthere.jsp?ei=1365454&tp_key=8f4d835e66&sti=mmb
Governments around the world have responded to the pandemic by borrowing, and spending, on a vast scale, equivalent to 12% of world GDP. Twelve years ago, in the financial crisis, monetary policy did the heavy lifting in supporting growth. Now, with interest rates near zero, the burden has fallen on fiscal policy.