Home >Economy >Hockey stick to K shaped recovery: CFA Institute members realign expectations

In response to a survey conducted in March, the largest share of members of CFA Institute members said they expect a K-shaped recovery with different parts of the economy recovering in different times, rates and magnitudes. The K-shaped recovery marks a distinct shift away from the “hockey-stick shaped" recovery predicted last year, when close to 75% of respondents thought that any upturn would be slow or stagnant in the short term, before picking up in the medium term.

The survey was delivered to 150,024 members and received 6,040 responses.

In the latest survey, 32% of respondents took a more optimistic view that the economy is on a steady path towards full recovery and operating at a pre pandemic pace in the next one to three years. The figures for responses from South Asia, including India, are similar to the global figures with 40% of respondents in South Asia favouring a K shaped recovery. Another 36% voted in favour of a steady path towards full recovery in South Asia. In contrast respondents in other emerging markets took a more pessimistic view. 23%, 25%, and 27% of respondents in Latin America and Caribbean, Middle East, and Africa, respectively, believe their economy is already on a steady path to recovery.

“The post-pandemic world is quite visibly a volatile one, and everyone is eyeing the nature of our economic recovery from the same. I believe the most predictable bounce-back would be of a K-shaped nature, wherein different parts of the economy would recover at different rates. It is of course, a certainty, that COVID-19 is bound to affect all walks of life and will influence Govt. policies, Tax regulations, and the entire Indian financial landscape," said Vidhu Shekhar, CFA, CIPM, Country Head, India, CFA Institute.

When asked about the huge rise in stock markets after the pandemic, a large share of the respondents felt that the rebound had run up ahead of economic recovery. About 45% said equity markets have recovered too quickly on the impulse of monetary stimulus and that they are now out of pace with the real economy and a correction is to be expected within the next 1-3 years. However, when asked which assets will be most negatively affected by central bank tightening, respondents ranked growth stocks, high yield corporate bonds and developed market government bonds in that order.

The assets likely to be most positively affected by tightening according to respondents are value stocks, US dollar index, gold and developed market stocks in that order. On the question of whether central banks will be forced to raise interest rates, there was no decisive majority. About 58% expect a rise in taxes and government spending post pandemic.

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