Key Points

  • This recession is the result of a shock, not the natural end result of a slow build-up of excesses. This may mean the recession and bear market could be deeper, but also that the duration may be shorter.

  • Early signs in Asia of a V-shaped rebound are encouraging, but may instead look more like a square root, flattening out as weaker global growth saps Asian economic momentum in the second quarter.

  • Emerging markets, led by China and South Korea, are leading the recovery in the economy and markets as they did during the global recessions of 2000-02 and 2008-09.

In a typical recession, the global economy tends to have large imbalances that take a long time to unwind, such as a housing bubble or overinvestment by businesses. This time the global economy is experiencing a shock, rather than the natural end result of a slow build-up of excesses. While this implies that the recession and bear market could be deeper, but the duration may be shorter. We have yet to see how deep this recession is going to go, and although it is unlikely to end until people feel comfortable leaving their homes again, it isn’t too early to consider what the eventual recovery may look like and what areas may lead it.

Already recovering

Parts of the world are already in recovery. China and South Korea are recovering from their peak in COVID-19 cases and related business shutdowns, as you can see in the chart below. Even the Chinese city of Wuhan, the epicenter of the epidemic, will reopen in about a week (April 8). Together, these two countries account for about 20% of the world’s population and economy.

Recovering: China and South Korea


Source: Charles Schwab, World Health Organization data as of 3/29/2020.

With the threat of the virus receding, economic activity is reviving in Asia. Economic indicators we can measure daily—or even hourly—like road traffic, air pollution, and port activity all point to a pick up. Early official monthly data reports for March seem to support these signs of recovery. For example, last week’s data on South Korean exports measuring the first 20 days of March showed a monthly rebound of over 50% in goods sent to China.