Recovery after the pandemic

In December as a whole, the American S&P 500 Index rose by 3.9 per cent measured in USD, while the European Stoxx 600 Index increased by 2.6 per cent measured in EUR and the Nordic VINX Index climbed 1.4 per cent measured in NOK. Here in Norway, the Oslo Stock Exchange Benchmark Index (OSEBX) rose by 4.7 per cent. In total, the MSCI World Index ended last year up more than 13 per cent measured in local currency, despite a drastic fall of 33 per cent during a few weeks in March.

A recession for the history books

The pandemic-related lockdowns led to the world economy experiencing the first global recession since the financial crisis in 2009. Last year's recession was not only the worst in recent times but also one of the shortest ever. The average duration of the USA's 18 recessions in the past century is 13 months. In 2020, the recession only lasted for four to six months. The record fall in GDP in the second quarter was followed by a record recovery in the third quarter.

Focus on rescue packages

There were fresh COVID-19 outbreaks in the fourth quarter, and these led to weaker growth momentum. To support their economies, authorities worldwide implemented unprecedented monetary policy and fiscal policy measures. After several rounds of toing and froing, the US fiscal policy rescue package was finally increased and maintained just before Christmas. This USD 900bn package equals around 4 per cent of the USA's GDP.

Vaccinations have begun

Most countries throughout the world have just begun their vaccination programme, but this is a new and comprehensive process. The speed of the vaccination rollout will be important for growth prospects, and the tempo is expected to increase in January. However, factors such as logistics and the side-effects of vaccines or mutations of the virus may slow progress.

The road ahead ...

In any case, it appears probable that the vaccinations are the start of the end of the pandemic and thus the continuation of the economic recovery. In light of increasing economic growth, shares therefore appear to be a good investment alternative.

As sure as the spring will follow the winter, prosperity and economic growth will follow recession.
Bo Bennett