J.P. Morgan Asset Management: COVID-19 recession: Plotting a path to recovery

With quarantine measures to tackle the COVID-19 coronavirus outbreak causing a sharp plunge in global economic activity data, investors are asking when and how the current crisis will end, and how the recovery will take shape.

With this in mind, we describe three scenarios for the expected economic and asset market recovery (the central case, the downside case and the upside case). A guiding principle is that asset markets will react first and foremost to the peak in infection rates, with economic data the next to turn and employment data the last to follow.

Three major questions guide our analysis:

1. How long will the restrictions stay in place, preventing any meaningful recovery from taking hold?
2. To what extent will second-order effects kick in, such as failing businesses producing additional layoffs and spending cutbacks?
3. How will individual behaviour change once social distancing measures have lifted?

Our central, upside and downside scenarios translate to different levels of GDP but a similar trajectory.