Beat Wittmann: «Ten Reflections on Post-Pandemic Prospects

The past year has been historically painful in many dimensions. But this crisis should not be wasted, Beat Wittmann writes in an essay on finews.first and offers his view on post-pandemic prospects.

This article is published on finews.first, a forum for authors specialized in economic and financial topics.

1. Ideological Polarization in Politics, Society and Economics

The political, societal and economic order and the commentariat are evermore ideologically polarized and fragmented and this is a danger for democracy, economic welfare and global security and sustainability. Only mutual respect for individuals, rule of law, institutions and environment within a peaceful and prosperous multilateral framework can secure this.

2. Upcoming Lift-Off by Economic Stimulus and Vaccinations

The past year has been historically painful in many and various dimensions. But this crisis should not be wasted. We can by now reasonably expect that due to the U.S.-led and unprecedented economic stimulus as well as the steady progress at the vaccination front the world can start to get back to normality from the second half of 2021. This should result in an extraordinary unleashing of pent-up consumer demand.

3. Geopolitical Multipolar Co-Existence

The reach, relevance and stability of any globally relevant great power throughout history including the Romans, British Empire, Soviet Union, the U.S. and China have been defined by size, geography, demographics, economics, inclusion, technology, natural resources, organization, military and diplomatic capacity and soft power. In today’s world only three superpowers really matter from a holistic perspective, which is a challenged US, a rising China and a stable EU.

4. Central Banks Finally to Be Joined by Governments

All financial crises of the past four decades have been addressed by traditional and quantitative monetary policy expansion and unfortunately without ever addressing the structural root causes. Elected politicians have left the heavy lifting to the Central Banks, which faced an ever-expanding mandate from originally focusing on price stability and employment to addressing asset bubbles, housing crises, inequality, sustainability and climate change. It is key now that monetary policies are being complemented by adequate fiscal and structural policies.

5. Will the Inflation Genie Escape the Bottle?

From a secular perspective we have bottomed out with regard to interest and inflation rates and an ongoing normalization has to be welcomed. However, the current spike in U.S. rates and inflation expectations is not a general outbreak to the upside. Most notably the FED’s paradigm seems to have shifted not to repeat the mistake of the 2008 global financial crisis to err on the side of caution. U.S. President Joe Biden’s stimulation package is most likely an over-kill, but nevertheless, the right and timely political and economic thing to do and the slow and lagging EU would be well advised to follow suit.

6. Bubbling and Bursting Bubbles

Excess liquidity and ultra-low yields result in excessive asset prices and misguided investors’ behavior in financial assets. The biggest bubble the world has ever seen is the bond market and the biggest debt mountain ever is owed by the U.S. Government – and China happens to be the biggest creditor! The small bubbles include cryptocurrencies and SPACS, where there is no fundamental value to be determined.

7. Acceleration in Digitalization

The pandemic has resulted in a very significant increase in e-commerce but has also laid bare the costly deficiency and lack of digitalization across the public and private sectors. The pandemic will lead to a massive acceleration of technical applications, artificial intelligence and machine learning across all walks of our economic and real lives.

8. Sustainability – the Journey From Pretension to Reality

The big beneficiaries of the pandemic and related economic lockdowns and restrictions have been nature, climate and environment. I am convinced that on one side all aspects of sustainability and ESG will become a decisive factor across the board and that on the other side rather little has been really achieved and done so far. Green and sustainability «washing» is the dominating current state of affairs and therefore all countries and companies going ahead with speed and substance have unprecedented opportunities to tap.

9. Favored Continental European Equities

In an environment of unprecedented economic stimulus and normalizing interest rates equities are the asset class of choice. The best risk-reward trade-off can be found in export-sensitive Continental European equity markets such as Germany as they are valued at a significant discount to US equities and will benefit most of the U.S. economic stimulus program and superior demand growth from Asia.

10. At Least Two Key Risk Factors Remain

I have two key risks on top of my mind one from a health situation and one from an economic perspective:

• from a pandemic health risk dimension that we might be confronted with a more dangerous COVID variant against which current vaccines won’t be effective;
• from an economic perspective, the world needs the monetary and fiscal stimulus to be employed in rehabilitation and investment into infrastructure (climate, energy, education, health and transportation) to address structural growth, productivity and inequality issues.

Previous contributions: Rudi Bogni, Peter Kurer, Rolf Banz, Dieter Ruloff, Werner Vogt, Walter Wittmann, Alfred Mettler, Robert Holzach, Craig Murray, David Zollinger, Arthur Bolliger, Beat Kappeler, Chris Rowe, Stefan Gerlach, Marc Lussy, Nuno Fernandes, Richard Egger, Maurice Pedergnana, Marco Bargel, Steve Hanke, Urs Schoettli, Ursula Finsterwald, Stefan Kreuzkamp, Oliver Bussmann, Michael Benz, Albert Steck, Martin Dahinden, Thomas Fedier, Alfred Mettler, Brigitte Strebel, Mirjam Staub-Bisang, Nicolas Roth, Thorsten Polleit, Kim Iskyan, Stephen Dover, Denise Kenyon-Rouvinez, Christian Dreyer, Kinan Khadam-Al-Jame, Robert Hemmi, Anton Affentranger, Yves Mirabaud, Katharina Bart, Frédéric Papp, Hans-Martin Kraus, Gerard Guerdat, Mario Bassi, Stephen Thariyan, Dan Steinbock, Rino Borini, Bert Flossbach, Michael Hasenstab, Guido Schilling, Werner E. Rutsch, Dorte Bech Vizard, Adriano B. Lucatelli, Katharina Bart, Maya Bhandari, Jean Tirole, Hans Jakob Roth, Marco Martinelli, Thomas Sutter, Tom King, Werner Peyer, Thomas Kupfer, Peter Kurer, Arturo Bris, Frederic Papp, James Syme, Dennis Larsen, Bernd Kramer, Ralph Ebert, Armin Jans, Nicolas Roth, Hans Ulrich Jost, Patrick Hunger, Fabrizio Quirighetti, Claire Shaw, Peter Fanconi, Alex Wolf, Dan Steinbock, Patrick Scheurle, Sandro Occhilupo, Will Ballard, Nicholas Yeo, Claude-Alain Margelisch, Jean-François Hirschel, Jens Pongratz, Samuel Gerber, Philipp Weckherlin, Anne Richards, Antoni Trenchev, Benoit Barbereau, Pascal R. Bersier, Shaul Lifshitz, Klaus Breiner, Ana Botín, Martin Gilbert, Jesper Koll, Ingo Rauser, Carlo Capaul, Claude Baumann, Markus Winkler, Konrad Hummler, Thomas Steinemann, Christina Boeck, Guillaume Compeyron, Miro Zivkovic, Alexander F. Wagner, Eric Heymann, Christoph Sax, Felix Brem, Jochen Moebert, Jacques-Aurélien Marcireau, Ursula Finsterwald, Claudia Kraaz, Michel Longhini, Stefan Blum, Zsolt Kohalmi, Karin M. Klossek, Nicolas Ramelet, Søren Bjønness, Lamara von Albertini, Andreas Britt, Gilles Prince, Darren Willams, Salman Ahmed, Stephane Monier, and Peter van der Welle, Beat Wittmann, Ken Orchard, Christian Gast, Jeffrey Bohn, Juergen Braunstein, Jeff Voegeli, Fiona Frick, Stefan Schneider, Matthias Hunn, Andreas Vetsch, Fabiana Fedeli, Marionna Wegenstein,  Kim Fournais, Carole Millet, Ralph Ebert, Swetha Ramachandran, Brigitte Kaps, Thomas Stucki, Teodoro Cocca, Neil Shearing, Claude Baumann, Tom Naratil, Oliver Berger, Robert Sharps, Tobias Mueller, Florian Wicki, Jean Keller, Fabrizio Pagani, Niels Lan Doky, Karin M. Klossek, Ralph Ebert, Johnny El Hachem, Judith Basad, Katharina Bart, Thorsten Polleit, Beat Wittmann, Bernardo Brunschwiler, Peter Schmid, Karam Hinduja, Stuart Dunbar, Zsolt Kohalmi, Raphaël Surber, Santosh Brivio, Gérard Piasko, Mark Urquhart, Olivier Kessler, Bruno Capone, Peter Hody, Lars Jaeger, Andrew Isbester, Florin Baeriswyl, and Michael Bornhaeusser, Agnieszka Walorska, Thomas Mueller, Michael Welti, Ebrahim Attarzadeh, Marcel Hostettler, Hui Zhang, Michael Bornhaeusser, Reto Jauch, Angela Agostini, Guy de Blonay, Tatjana Greil Castro, Jean-Baptiste Berthon, Marc Saint John Webb, Dietrich Goenemeyer, Mobeen Tahir, Didier Saint-Georges, Serge Tabachnik, Rolando Grandi, and Vega Ibanez.