The recent bounce in financial markets, notably equities, seems justified by the improvements in the business surveys and the stabilisation in consumer confidence. However, further large gains from here would require a V-shaped economic recovery. While that scenario is not completely unrealistic in some countries, including the US and Japan, it is much more likely that the recovery falters as the temporary factors that have contributed to the rebound start to fade or actually go into reverse. Many economies are also at growing risk of a new shock in the form of falling wages.
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