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Monthly Macro Insights February 2021
Marc-Antoine Collard
Chief Economist,
Director of Economic Research
The launch of vaccination campaigns and additional policy measures
announced at the end of 2020 – notably in the US and Japan –
have raised hopes of a turnaround in the recovery later this year after
the expected soft patch in Q1 2021. However, new variants of the virus,
logistical problems with vaccine distribution and uncertainty about
take-up suggest caution. Meanwhile, the rise of inflation could cause bouts
of volatility in financial markets.
The world is in the grips of the second wave of Germany is an emblematic example of a striking
the COVID-19 pandemic. New cases and deaths contrast between a sharp drop in mobility
recently reached record highs, forcing several producing only a small drag on economic activity.
governments to impose tighter restrictions, Flash estimates showed German GDP increased
although the health situation has started to improve 0.1% q/q in Q4 2020, while GDP in Spain (0.4%)
and France (-1.3%)(1) also surprised to the upside,
in some countries.
even though each of the countries was in varying
In the absence of timely and broad-based official stages of lockdown.
data regarding the impact on the economy, In fact, several businesses hit hard by coronavirus-
economists have relied on alternative high- related restrictions, shutdowns and customer
frequency measures to track growth, in part based unease seem to have adapted to the new normal
on Google mobility data. Through the first three by creating entirely new services, shifting how
quarters of last year, these indicators proved useful they deliver products or replacing in-person
in tracking global growth momentum. However, appointments with video conferences.
the link between mobility and GDP growth has Although the relationship between mobility and
weakened recently as restrictions are impacting growth is shifting, it remains nonetheless a relevant
activity in a more limited manner. indicator when assessing trends in global activity.
Monde - Covid-19
Monde - Restrictions Restrictions Covid-19 R.-U. - Covid-19
R.-U. - Covid-19
World - Covid-19 restriction rating World - Covid-19 vaccination
Patients admisPatients admis
à l'hôpital à l'hôpital et décès
et décès
index, 10 = most restrictive doses administrated per 100 people
0 10 15 15
9 9
8 8
7 7
10 10
6 6
5 5
4 4
3 5 5
3
2 2
1 1
0 0 0 0
03/2020 03/2020
06/2020 06/2020
09/2020 09/2020
12/2020 12/2020 2020 2020 2021 2021
Eurozone Eurozone
Germany Germany
Japan UK Japan US UK US UK US UK US
Germany Germany
France France
Source: UBS, Rothschild & Co Asset Management Europe, Source: OurWorldinData, Rothschild & Co Asset Management Europe,
February 2021. February 2021.
(1) Source:Monde
Eurostat,- Vaccination
29/01/2021. Covid-19
Monde - Vaccination Covid-19 É.-U. - Prix deÉ.-U. - Prix derésidentiel
l'immobilier l'immobilier résidentiel
dosesMacro
| Monthly
doses2administrées administrées
pour 100 pour
personnes
Insights 100 personnes
| Rothschild & Co Asset Managementindice
Europeen|%,
February
indice 2021
a/a en %, a/a
4 4
China ChinaThe trajectory of the latest monthly data clearly extend the US, explain most of this return to square
points to a loss of momentum at the end of last one, whereas most countries will still exhibit a
year. significant loss in output two years after the shock.
As mobility plummeted and both US and European Furthermore, uncertainties regarding the vaccines
consumers pulled back into their homes, retail remain high as widespread hesitancy could hamper
sales dipped in November. The drop in US vaccine take-up. Immunity could also turn out to be
December private service-sector employment and shorter than anticipated, while new variants – from
global Markit business confidence index in January the UK, South Africa or Brazil – remain a wild card.
are another indication of the broader imprint of the Were the recovery to be delayed, liquidity pressures
economic consequences of the second wave. could re-emerge and insolvencies could rise and
become rampant, probably entailing repricing of
Yet, the sharp slowdown is expected to give way to
risk in credit markets and a tightening of financial
rising momentum in Q2 2021 as vaccines become
conditions.
more readily available, allowing contact-intensive
activity to strengthen and pent up demand to roll in. In this still highly uncertain environment, monetary
policy should remain very accommodative. As
After a slow start to the global vaccine deployment, expected, the Fed has kept its monetary policy
investors are now debating how fast advanced steady and maintained its current guidance and
economies can vaccinate the most vulnerable pace of asset purchases, i.e. USD120bn per
and start returning to normality. Governments are month, as it acknowledged that the recovery has
expected to probebly start lifting restrictions once moderated in recent months, especially the labour
Monde - Restrictions
theMonde Covid-19 20%-25% of the population
most vulnerable R.-U. - Covid-19
- Restrictions Covid-19 market. R.-U. - Covid-19
are vaccinated, which might be reached by March Patients admis à l'hôpital et décès
During his pressPatients
conference,
admis àChair Powell
l'hôpital et décès
in the UK, April in the US and May in continental
stressed downside risks to the economic outlook
0 Europe and Canada.
10
15
15
9 and reiterated it was premature to contemplate
9
8 However, inequalities are likely to grow across tapering, implying that Fed policy changes remain
8
7 countries
7
as the strength of the recovery will a 10
long way off. He also downplayed significant price
10
6 depend,
6 among other things, on the extent increases in the housing market, noting that some
5 of
5 domestic disruptions to activity – which is of the tightness in the resale market that has led to
4
related
4 to the structure of the economy and its price
5 increases is likely a passing phenomenon. Yet,
3 5
reliance
3 on contact-intensive sectors – and on the if that uptrend were to continue, the Fed might find
2 2
1
effectiveness of policy support to limit persistent itself between a rock and a hard place, especially
1
0 damage.
0
as0financial markets’
0
valuations are perceived as
03/2020 06/2020
In03/2020
its latest
09/2020
06/2020
World Economic09/2020 12/2020
Outlook, the12/2020
IMF frothy2020
and inflation
2020will start to rise.2021 2021
Eurozone Germany
Eurozone Japan
Germany UK Japan US UK US UK USUK Germany
US France
Germany France
predicted global GDP would return to its 2019 level Indeed, price pressures are expected to be volatile
by the end of this year. Yet, China, and to a certain in 2021. Over the past weeks, inflation reports
Monde - Vaccination Covid-19
Monde - Vaccination Covid-19 É.-U. - Prix de l'immobilier
É.-U. résidentiel résidentiel
- Prix de l'immobilier
US - Retail sales World - GDP gap
doses administrées pour 100 personnes
doses administrées pour 100 personnes indice en %,indice
a/a en %, a/a
in %, m/m, ex volatil components in %, Q4 2019 vs Q4 2021
4 4
12 China China
612 6
World World
US US
2 2
Japan Japan
Brazil Brazil
Germany Germany
0 0 Canada Canada
France France
UK UK
2 -2 Spain Spain
Mexico Mexico
S. Africa S. Africa
12 12
4 -4 Italy Italy
01 05 02 06
03 07
04 0805 09 06 10
07 1108 09 -5 -50 0 5 5 10 10
01 02 03 04 12 10 11 12
2020 2020
Source: Macrobond, Rothschild & Co Asset Management Europe, Source: IMF, Rothschild & Co Asset Management Europe,
February 2021. February 2021.
Cours du Bitcoin
Cours du Bitcoin É.U. - Taux10
É.U. - Taux souverain souverain
ans 10 ans
en dollar US en dollar US en % en %
16 5 5
16
12 151 151
12
0 0
8 148
8 148
4 3 |4 Monthly Macro Insights | Rothschild & Co Asset Management
-5 Europe | February 2021
-5
145
145
0
0 -10 142
-10 142
-410 8 15
9 7
10
8 6
7 5 10
6
4
5 5
3
4
2 5
3 from the US, Germany, and Spain have all surprised
1
uncertainty, particularly regarding the policies of
0to the upside. Turbulent inflation data is likely to the new Biden0 administration and the handling
2
1
continue,
03/2020 and06/2020
to distinguish between signal
09/2020 and
12/2020 of the post-Brexit2020
new procedures. While this 2021
0 0
03/2020noise on an expected
Eurozone
06/2020
Germanygradual reflationary
09/2020
Japan
12/2020
UK pathUSwill year’s economic
2020 recovery
UK is likely
US to be focused
2021
Germany on France
undoubtedly
Eurozone cause debate
Germany Japan among
UK investors.
US Price services, especially
UK inUSthe travel, leisure, hospitality,
Germany France
levels will be pushed higher in the first part of 2021 entertainment-related spending, there is also a
given the large drop at the start of the pandemic, potential for upward pressure in services inflation.
with energy
Mondebeing one of the
- Vaccination usual suspects,
Covid-19 É.-U. - Prix de l'immobilier résidentiel
However, even with the anticipated growth rebound
making
Monde the year-over-year
- Vaccination
doses Covid-19
administrées comparison
pour 100 personnesfavourable. É.-U. - Prixindice
de l'immobilier
en %, a/a résidentiel
in 2021-22, output gaps are not expected to close
doses
In theadministrées
Eurozone, pour
this 100 personnes
bounce is being reinforced indice en %, a/a
4
until well after 2022. Consistent with persistent
4
by the removal 12
of Germany’s6 VAT cut and the negative output China
gaps, still elevated unemployment
World
introduction
12 of a carbon
6 tax in January, as well as China
ratesWorld
and significant US underutilisation in the labour
2
2
the reweighting of the harmonised basket away market, US
inflationJapan
is thus likely to remain subdued.
Japan Brazil
from sectors where demand – and prices – are Its volatility
Brazil might
Germanynonetheless spoil investors’
0
depressed. Germany
optimistic
Canada
0 Canada scenario France as financial markets may try to
What’s more, global manufacturers continue to push bond yieldsUKhigher, especially if they interpret
France
-2 UK Spain
-2 face COVID-related supply constraints (e.g. shortage transitory
Spain inflation
Mexico rises as a sustained surge. In
Mexico S. Africa
of truckers and dockworkers, as a result of which
12 fact,S. looking
Africa ahead,
Italy
one of the main challenges
-4 12
-4 freight ships have formed traffic jams in ports will be exiting extreme
Italy
-5 stimulus0without disrupting
5 10
01 02 03 04 05 06 07 08 09 10 11 12 -5
01 across
02 03 the
04 US
05 and
06 07the082020
EU)09and
10 are
11 also
12 facing financial stability. ■0 5 10
2020
US - du
Cours Housing
Cours
Bitcoin prices
du Bitcoin US É.U.
- Job- Taux
creation
É.U. - Taux 10
souverain souverain
ans 10 ans
index in %, y/y in million
enUS
en dollar dollar US en % en %
16 16 5 5
12 12 151 151
0 0
8 8 148 148
4 4 -5 -5 145 145
0 0
-10 142 142
-10
-4 -4 139 139
-8 -15
-8 -15
136
-12 136
-12 -20
-20 133
-16 133
-16
-20 -25 130
2000-20 2004 2008 2012 2016 2020
-25 130
2019 2020
2000 2004 2008 2012 2016 2020 2019 2020
m/m Total (rhs)
m/m Total (rhs)
Source: Macrobond, Rothschild & Co Asset Management Europe, Source: Macrobond, Rothschild & Co Asset Management Europe,
February 2021. February 2021.
4 | Monthly Macro Insights | Rothschild & Co Asset Management Europe | February 2021Performance of the indices and interest rate levels
Price as of 29/01/2020 1 month % change
Equity markets
CAC 40 5 399 -2.7%
Euro Stoxx 50 3 481 -2.0%
S&P 500 3 714 -1.1%
Nikkei 225 27 663 0.8%
Currencies
EUR/USD 1.21 -0.7%
EUR/JPY 127.13 0.8%
Price as of 29/01/2020 1 month bp
Interest rates
Eurozone -0.62% 14
3M
United States 0.05% -1
Eurozone -0.52% 5
10 Y
United States 1.07% 15
(1) Basis point.
Source: Bloomberg, data as of 29/01/2020. Performances in local currency.
Past performance is not a reliable indicator of future performance and is not constant over time.
Disclaimer
The comments and analyses in this document are provided purely for information purposes and do not constitute any investment recommendation or advice.
Rothschild & Co Asset Management Europe cannot be held responsible for any decisions taken on the basis of the elements contained in this document or inspired
by them (total or partial reproduction is prohibited without prior agreement of Rothschild & Co Asset Management Europe). Insofar that external data is used to
establish terms of this document, these data are from reliable sources but whose accuracy or completeness is not guaranteed. Rothschild & Co Asset Management
Europe has not independently verified the information contained in this document and cannot be held responsible for any errors, omissions or interpretations of
the information contained in this document. This analysis is only valid at the time of writing of this report.
Due to the subjective nature of these analysis and opinions, these data, projections, forecasts, anticipations, hypotheses and/or opinions are not necessarily used
or followed by Rothschild & Co Asset Management Europe management teams who may act based on their own opinions and as independent departments within
the Company. Some forward-looking statements are based on certain assumptions that may be likely differ partially or fully from reality. Any hypothetical estimate
is inherently speculative, and it is conceivable that some, if not all, assumptions about these hypothetical illustrations do not materialise or differ significantly from
the current determinations. Rothschild & Co Asset Management Europe cannot be held liable for the information contained in this document and in particular for
any decision taken on the basis of this information.
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5 | Monthly Macro Insights | Rothschild & Co Asset Management Europe | February 2021Contacts
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