Thread by @jnordvig

Just did @BloombergTV with @CarolineHydeTV, @romainebostick and @TheStalwart. Main discussion was about the recovery, and whether it is in question

My main point...watch two engines of recovery...

The recovery, since April-May, has had two engines:
First, the gradual reopening, in the US (with some setbacks along the way) and globally.
Second, the roll-out of big fiscal stimulus (in the US, and more broadly)

We have to watch these two engines. The low fatality rates and the greater appreciation for the importance of superspreading events and mask use (and aversion to big 2nd round lockdowns), means that big 2nd round lockdowns are unlikely, unless hospitalizations/death really move.

Hence, reopening engine should be assumed to move the recovery forward, at least in the next 1-2 months (before weather effect is a wildcard). This is generally the case in both the US and Europe, although we have to watch the data (death and hospitalizations in particular).

But the other engine, could look different. There are big question-marks around Phase IV stimulus in the US. Both in terms of size and timing (and both matters). And politics are playing into this, meaning that we may not get the most economically rational policy implemented...

If this second (fiscal) engine slows, or stops, it may not be enough that the re-opening engine is still running. [I do not have to mention that monetary policy alone cannot do the heavy lifting at this level of rates and FCI]

I will leave it at that. END