In Brief

• Social distancing measures to combat COVID-19 have plunged the global economy into the deepest recession since the Great Depression.
  
  
• Some success in slowing the spread of the disease and a recognition of the economic toll from social distancing are leading to a relaxation of social restrictions. However, a resumption of a normal economy will have to await the widespread distribution of a vaccine, hopefully in 2021.
  
  
• In the U.S., following a huge GDP decline in the second quarter, we expect to see a sharp bounce in the third. However, progress from then on should be slow until a vaccine is distributed. This suggests double-digit unemployment into 2021.
  
  
• While Fed easing and the recession have generally reduced Treasury rates, massive QE does threaten higher inflation and higher rates down the road. Meanwhile, the recession is leading to a wave of corporate downgrades.
  
  
• While there are good reasons for U.S. equities to remain relatively resilient in the midst of the social distancing recession, the rebound in stocks from their March lows may be overdone, risking a correction in reaction to disappointment in economic data or medical progress.
  
  
• Although the entire world economy has slumped into the social distancing recession in a similar way, the paths out could be quite different and those economies with more disciplined public health practices or deeper pockets could fair better in the rebound.
  
  

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