Central banks’ “beautiful” normalisation of balance sheets and rates will drive the transition from a reflationary into a late financial cycle regime against a backdrop of consolidating growth (from both a macro and micro fundamental standpoint) and subdued inflation.
Monica DEFEND, Lorenzo PORTELLI
Senior Economic Advisor
While in the short term we do expect some temporary relief coming from positive economic surprises and supportive news on the trade front (should coronavirus impact be limited), on a medium-term horizon our economic scenario confirms the fragility of the profit cycle. Exceptional features of this cycle are lower growth due to trade war escalation, unprecedented low interest rates due to unconventional monetary policy and a fairly resilient labour market due to the strong domestic sector resilience. Notwithstanding these specificities, the 2020 is still compatible with a late cycle phase; but the most likely scenario for the end of 2021 is the transition into a correction phase
Annalisa USARDI, Lorenzo PORTELLI