S&W The Pulse

In this episode we discuss the new business cycle that is starting. Global equities (as measured by the MSCI All Country World Index) rose 19% in the second quarter, the strongest rally for 11 years. Equities have now retraced 72% of the prior falls since the COVID-19 outbreak led policy makers to lock down whole economies earlier this year1. Markets are optimistic that a new business cycle has started after a short, sharp recession. There is some evidence of this happening with consumers spending in the shops again following the easing of restrictions. For instance, UK underlying real retail sales (excluding auto fuel) rebounded by a record +10% in the month of May, after a -15% collapse in April.We see three reasons to believe that this business cycle could be extended beyond an initial bounce in growth. First, the pandemic was an exogenous event, rather than a domestic shock triggered by economic imbalances, even if revenues in selected sectors, such as travel, could take years to recover to pre-COVID-19 l