• The collapse in economic activity has been a shock effect, unrelated any underlying trends before the crisis began – and induced mainly by the lockdown.
• This has fed the view that economic activity can be reignited much faster this time – “like flipping a switch” – once the lockdown has been lifted. This view ignores second-round effects.
• In this TAD we look at second-round effects on credit (p.3), consumer demand (p.4), and deflationary pressures on wages (p.5). All of these may resist the positive impulse from fiscal and monetary measures.
• Dispersion of returns between equity sectors has reached an absolute minimum. Second-round effects will likely include a greater sector dispersion with implications for their relative performance (pp. 6-7).