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Will the Pre-Covid economy ever return?
This question has been niggling me for months.
See, I don't think things will ever be the same again (I'm sure many would say that's always the case).
There'll still be economic growth, and we'll figure things out, but the pre-Covid economy is a bad benchmark.
To be clear I'm not talking about GDP numbers.
I'm talking about the people that make up the economy and the psychological shift that has taken place.
Take the WFH/hybrid working.
According to Morgan Stanley nearly 70% of big US companies are adopting a flexible work model 👇
What does that mean for 'middle' management and the hierarchy?
Broadly speaking, many businesses will surely split into teams and develop flatter organisation hierarchies.
Managing communication through large vertical hierarchies and remote-working seems unnecessary. Many were arguing this even before remote-working.
And there are always second-order effects.
Consumer patterns will undoubtedly change.
The ECB recently published survey research:
In all countries and particularly for the hospitality and services sectors, a large share of households reported the “realization of not missing it” as their primary reason for cutting consumption
The survey was taken in July 2020, just as countries were emerging from lockdowns so the timing isn't the best...
That said, this one really caught my eye 👇
I don't know about the other countries, but in Spain, at least one daily café stop is practically a religion.
Big picture. Without the need to commute, that's less business in food & drink.
Why go out for coffee? Buy a coffee machine.
Pushed for time and need a takeaway? Nope, saved time on the commute so I'll cook tonight.
Then there's the 'conspicuous consumption'.
If people spend less time in the office, will they feel as pressured to show off for status?
What people do, what they wear, where they go and how often are all sure to be longer-lasting effects of the post-Covid world.
Add in the ESG components of not commuting, using smaller office spaces, and worker 'well-being', less business travel and so on.
The Pre-Covid economy is not something we are ever going to return to...
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After rugging the Chinese property market, now China are supporting it!
Except that's not entirely true...
So important to differentiate the CCP from regional Chinese governments 👇
Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution, said he expected other cities to follow Harbin in announcing support for the sector, especially "those under great pressure from high inventories, including some tier-three and four cities in central and western regions."
In a further positive sign for developers, Morgan Stanley lifted its view on China's real estate industry to "attractive" from "in line", saying regulators may relax their grip on the sector to help stabilise it and support the economy.
Why doesn't it make sense to just treat China as one big entity?
It's YUUUUUGE, and there are enormous differences by region.
Which is part of the reason for the tiering system...
In Harbin, they are trying to attract new residents to fill the homes, and ensure development of the local economy. 👇
Additional measures from Harbin will include subsidies of up to 100,000 yuan ($15,500) for talented residents with skills and qualifications looking to buy homes for the first time.
"If policymakers were to make statements about assuring property projects completion and supporting restructure, it could alleviate concerns from home buyers and the financial system,"
These measures are localised to these regions (so far)
If the CCP steps in with supportive measures for tier 1 & tier 2 cities, then there's a policy message driving it.
That's very different to these types of measures announced by a lower-tier region or city.
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Wall Street Banks Report Earnings: Is the party over?
The big banks kick off the proper earnings season this week. After a solid year of outperformance, earnings growth is expected to slow... 👇
No longer buoyed by outsized trading revenues and with 60% of loan-loss provisions already recovered, banks are staring down the barrel of lending in a low-rate environment as one of their main income streams again.
In this scenario, cost-cutting is an attractive way to boost profitability.
According to this Reuters article, most banks will report that expenses increased more than revenue, as technology spending has increased alongside wages.
Analysts also estimate that JPMorgan's third-quarter net income will decline about 3% from a year earlier on lower trading revenue and higher expenses.
From a broader risk perspective, banks' views of lending and loan demand will frame the debate around economic risks and sentiment going forward.
Handy calendar via ewhispers here 👇
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