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“We don’t seem to be close to herd immunity anywhere in the world. We are still in a situation where infection rates are doubling every three weeks without any mobility restrictions,” he says.
Direkt news agency reported in early December that the chief economist called for a break from the stock market due to the “huge challenges” of the coming quarters. He does not think it is possible to ease restrictions during the usual flu months like January and February.
The closing of this spring was too harsh, while at the same time there were too few restrictions when fall came. Therefore, it has become a difficult situation again from the perspective of contagion before winter.
“An optimal closure this winter is between spring and October / November,” he says.
Bars, restaurants, gyms and nightclubs must not remain open at all. Also, things like shopping rounds run the risk of bringing with them more use of public transport, so the German idea of closing unnecessary stores may be appropriate to reduce infection rates. The German plan is to stay closed at least until after weekends.
“It is very difficult to imagine a situation where economies are fully open before spring. Such assumptions are too optimistic. There will be no strong rebound in Europe in the first quarter after a weak fourth quarter, “says Nikolaj Schmidt.
Using the same reasoning, he estimates that US economic development will be much worse than the consensus assessment in the first quarter. In addition, he believes that the same will happen in other countries such as Japan and Mexico.
During the week, the United States appears poised to hit 300,000 deaths and records a couple of 3,000 deaths per day. The chief economist estimates that restrictions will be required in the country in the coming months to avoid a further deterioration of the situation.
Stock markets globally have been trading strongly with the help of the hope of a speedy recovery. Nikolaj Schmidt therefore sees a risk of decline, as optimism appears to have been too great. Even in the corporate bond market, he fears it has risen too quickly from a price perspective.
At the same time, he notes that strong stimulus and low interest rates are helping to push investors into increasingly risky assets for a return. After a difficult six-month period that is the closest to us financially, he believes that the growth phase will return to the second half of 2021, supported by vaccination, and that then there may again be reasons to seek risk assets.
After the crisis, indebtedness in the business sector will have increased and it is possible that certain cancellations of payments have also occurred, especially among small companies in the service sector. States will have to work to close their deficits.
“But households have strong balance sheets and money to spend again on services,” he says.
As a result, interest in things like travel, shopping, and restaurant visits is expected to return quickly. Large reductions in these sectors can lead to re-employment.
“The closures do not change our need for social contacts,” he continues, and estimates that business trips will return, at least to some extent. Some previously physical meetings will be able to be taken digitally, but digital meetings make networking difficult.
Time with homework may have increased the possibility of certain days of that work even after the crisis. But, among other things to build and maintain a corporate culture within organizations, it can be thought that at least some physical presence will become the norm once the health crisis has subsided. The demand for office space will not disappear until now, assesses Nikolaj Schmidt.
In addition, he believes that the US economy will be supported by housing construction in the future. More than a decade since the financial crisis has eaten away at America’s housing surplus.
“Strong household balance sheets and low interest rates are good drivers for the housing market and new production,” he says.
The situation is also similar in many parts of the world, for example, southern European countries have also done a lot to adjust the situation since the financial crisis.
“Even for the northern European countries, the fundamentals seem favorable for housing,” he adds.
