‘Headwinds outnumber tailwinds’ for the global economy in 2021 and a vaccine is the answer, JPMorgan says

Meghann Showers

JPMorgan EMEA CEO Viswas Raghavan JPMorgan There are more risks to growth in 2021 than there are positive catalysts, as the world battles Covid-19, JPMorgan Chase EMEA chief executive Viswas Raghavan says. A resurgence in Covid-19, a deterioration in trade relations between the US and China and, in […]

JPMorgan EMEA CEO Viswas Raghavan


  • There are more risks to growth in 2021 than there are positive catalysts, as the world battles Covid-19, JPMorgan Chase EMEA chief executive Viswas Raghavan says.
  • A resurgence in Covid-19, a deterioration in trade relations between the US and China and, in the immediate term, the upcoming presidential elections could all undermine economic recovery.
  • Central banks are providing a robust safety net for the financial system, but only the availability of an effective vaccine against the virus will provide the tailwind the economy needs to fully recover.
  • Visit Business Insider’s homepage for more stories.

The global economy is emerging from the depths of the coronavirus crisis. US earnings have smashed expectations and central banks are on permanent stand-by to step in and provide support. And yet the headwinds to the economy easily outnumber the tailwinds, JPMorgan EMEA chief executive Viswas Raghavan says.

The coronavirus, which has claimed almost a million lives around the globe and unleashed the worst recession in recent history, has elicited an unprecedented response from the world’s central banks and governments. 

At least $7 trillion in cash to shore up national economies, plus billions in employment protection schemes and other benefits have washed into the financial system, while interest rates are near, or even below, zero to encourage consumption and ward off total economic collapse. 

The pace of recovery from the depths of the crisis in mid-March this year has been more rapid than many expected, and US companies delivered the biggest earnings beat in 20 years between April and June. But, as far as the banking world is concerned, this is, by no means, a cure-all.

“The headwinds outnumber the tailwinds,”  Raghavan said, in an interview with Business Insider.

“The headwinds continue to revolve around how the economic landscape pans out in terms of confidence and consumption. And that is a function of the severity of reinfection rates, how this virus manifests itself, and the economic impact thereon,” he said.

Millions in the US alone remain out of work and a resurgence of Covid-19 cases is threatening to derail the progress that has been achieved so far, as the race to find a vaccine heats up.

“Confidence is key,” he said. “Consumption is very much a mind game and how good you feel about the economy and yourself. And the greater the queasiness, the more careful you are going to be and that’s true, not just for people, but for companies and board rooms.”

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The pandemic has forced a lot of change, from billions of employees working remotely, some permanently, to sectors such as travel, hospitality and bricks-and-mortar retail that have been brought to the brink of collapse, to others that have been able to gear their businesses to a stay-at-home environment, with online deliveries, video communications and social networking.

“The question really is how many of those jobs are going to come back and how many will return post-furlough schemes being lifted globally?” Raghavan, who has two decades of experience in investment banking, said.

 If consumption suffers, a retrenchment in the economy in some form is to be expected, he added.

“Then you have, on top of all of this, a second wave and how does this compound a pretty already-grim outlook?” he said.

“The second one is anticipated volatility around the US elections, because that is only six weeks away,” Raghavan said.

Financial markets are factoring in a period of heightened volatility, not just around the November 3 election, but in the weeks that follow, because of uncertainty over the outcome and the length of time it may take to determine a clear winner.

The third headwind, he says, comes from the direction of trade relations between the United States and China, which he calls “a wildcard”. 

Since May 2018, the two have slapped billions of dollars in tit-for-tat tariffs on each other’s goods and services, a tentative trade deal looks vulnerable, diplomatic relations have deteriorated further over Hong Kong’s autonomy and Washington is now taking aim at Chinese companies, from technology group Huawei, to video-sharing app TikTok. 

From a corporate perspective, flaring tensions between the two countries have stirred up a lot more uncertainty over regulatory and anti-trust issues.

“The impact of trade tensions is not to be underestimated,” Raghavan said. “If you are a board member and your company wants to embark on cross-border M&A, you aspire to a clean, clinical, certain outcome. If there is a risk of a deal being mired in extensive anti-trust deliberation and the process is prolonged way beyond the normal completion schedule, then I’m not sure a board would be keen on subjecting a company to that length of uncertainty.”

Ultimately, the outlook is highly opaque, for consumers and corporates, and, with a bill of $7 trillion and counting, central banks have provided a robust safety net, but may not be able to do much more. 

Federal Reserve chairman Jerome Powell told Congress this week the central bank had “done basically all of the things that we can think of,” to grease the wheels of the economy. 

The onus now, therefore, is on the scientific community. There are more than 176 vaccines currently under development, according to the World Health Organization. On September 23, Johnson & Johnson, the world’s largest healthcare company, said one of its vaccines had entered the final stage of clinical trials on Wednesday. 

“The most obvious tailwind is a vaccine, or a cure,” Raghavan said. “That is probably the single biggest catalyst and the sooner it comes, the better, because it’s clearly going to take multiple quarters to get a mass-rollout of a vaccine.”

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