Economic Outlook Q3 2021

·      One of the constants over the last year has been the fact that, despite the ongoing pandemic and its headwinds for the global economy, the data flow has persistently come in better than expected.

·      The question going forward is: are expectations getting too far ahead of themselves, which would set up for possible disappointment as economic momentum proves to be less robust than assumed?

·      The further ability to ease restrictions and fully enable economic activity to return to pre-crisis levels is clearly a key determinant of whether global growth momentum can be sustained. There are, however, rising concerns as to whether such further progress will be able to continue.

·      The potential start of a new large wave of infection, even amid populations with high vaccination rates such as the UK, is justifiably raising concerns that reopening plans will once again be stymied.

·      While still early, the fact that a rise in cases is not resulting in a commensurate increase in severe outcomes in countries with high vaccination rates is heartening for policymakers and could support decisions to continue gradual re openings in developed markets as scheduled in the coming months.

·      Barring a significant diversion in the path toward the end of the pandemic, the baseline expectation is for fairly broad-based strength over the coming months, underpinned by strength in consumer spending, easing supply-side constraints and highly accommodative policy stances globally.

·      The current environment remains challenging and plagued by persistent uncertainty and headline risk, which speaks to a bias toward higher-quality investments to mitigate near-term volatility.

·      The outlook, however, is looking increasingly positive and would be supportive of tilting risk exposures toward those asset classes that stand to benefit from a cyclical upswing.

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