“For the first time since the start of the pandemic, there is now hope for a better future,” OECD chief economist Laurence Boone said in the report. “Advances in vaccines and treatments have raised expectations and uncertainty has faded. ”
But a resurgence of Covid-19 in Europe and the United States has clouded the outlook, and the OECD is warning governments not to withdraw aid too soon to struggling workers and businesses.
Following recent restrictions to control the spread of the virus, which could remain in place all winter, the Paris agency has downgraded its growth estimate for next year. He now expects GDP growth to reach 4.2% in 2021, down from his forecast of 5% in September.
“It will take time before we have collective immunity,” Boone said. “In the meantime, governments must continue what they have done this year. ”
One of the worst outcomes would be for leaders to repeat the mistakes of the 2008 financial crisis, she added. At the time, as concerns over skyrocketing debt grew, politicians in major economies decided to cut spending. It is now believed that this resulted in a longer and more taxing recovery.
“Fiscal austerity is not for 2021,” Boone said.
Federal Reserve Chairman Jerome Powell, who is due to testify in the Senate on Tuesday, also appears to be reluctant to endorse the arrival of Covid-19 vaccines as a panacea for the economy.
“Recent news on the vaccine front is very positive for the medium term,” he told lawmakers, according to prepared comments. “At the moment, significant challenges and uncertainties remain, including timing, production and distribution, and efficiency in different groups.
According to Powell, it “remains difficult to assess the timing and extent of the economic implications of these developments with any degree of confidence.”
Such warnings come as US politicians debate the next round of tax assistance, the fate of which could be linked to the outcome of the second round of senatorial elections in Georgia in early January. Meanwhile, economists are increasingly concerned that Americans are not getting the help they need.
“Massive monetary and fiscal responses have protected households and businesses,” the OECD said in its report. “However, in the absence of a substantial new fiscal stimulus package, a severe fiscal cliff would lead to a rapid withdrawal of household support, massive layoffs and a wave of bankruptcies. ”
This is not the basic assumption of the OECD. But as the Covid-19 crisis continues and spending fatigue increases, it is clearly a fear.
November was a spectacular month for stocks
Economists and policymakers maintain a cautious tone. But November – which marked the election of Joe Biden as the next US president and promising news on the development of Covid-19 vaccines – was an incredible month for the markets, which entered euphoria.
Unlike at the start of the year, the gains were not isolated for major US tech stocks.
- Despite a sharp pullback on Monday, the Dow Jones Industrial Average climbed nearly 12% in November, its best month since January 1987.
- The Russell 2000 Index, made up of smaller US stocks, climbed more than 18%, its best month since the index was created, according to Deutsche Bank. The same is true for the STOXX 600 index of European equities, which rose 13.7%.
And it’s not just stocks that have benefited from growing optimism.
- Futures contracts on Brent, the global benchmark for oil prices, jumped 27% in November.
- The price of Bitcoin, which hit an all-time high of around $ 19,860 on Monday, jumped nearly 40%.
“The main catalyst in this regard has been the overwhelmingly positive vaccine news that has been released in recent weeks, with [three] different candidates are releasing results and efficiency figures at the high end of expectations, “Deutsche Bank clients Henry Allen and Jim Reid told clients on Tuesday.” In turn, this alleviates fears that the company will have to learn how to living with the virus on a more permanent basis and offers hope for a return to normalcy much faster than expected just a month ago. ”
The notable outlier was the US dollar, which fell 2.3% against a basket of other major currencies. Vaccine developments have erased the demand for refuge, according to UBS. The Fed’s loose monetary policy is also weighing on the currency, according to the bank’s strategists.
DoorDash Joins Unicorn IPO Parade
Demand for initial public offers has come back to life on Wall Street, and DoorDash is getting into action.
The company, whose shares are expected to start trading this month, revealed in a filing with the Securities and Exchange Commission on Monday that it was looking to price its IPO between $ 75 and $ 85 per share, with 317, 7 million shares outstanding.
At the high end of that range, DoorDash would be valued at $ 27 billion, reports my CNN Business colleague Paul R. La Monica. That’s worth $ 16 billion the last time the delivery service tapped into private markets, according to research firm CB Insights.
Demand for shares is expected to be intense. DoorDash competes in the heavily guarded food delivery business with Uber and Grubhub, which was acquired this summer by Netherlands-based Just Eat Takeaway.com.
Coming Up: DoorDash isn’t the only hot IPO in town. Airbnb shares are also expected to start trading this month.
While the pandemic has helped food delivery startups, it has been more difficult for those in the hospitality industry. The company was valued at $ 18 billion earlier this year – still massive, but a sharp drop from the $ 31 billion valuation it commanded before Covid-19.
Fed Chairman Jerome Powell and outgoing Treasury Secretary Steven Mnuchin testify before the Senate Banking Committee starting at 10 a.m. ET.
- The November ISM Manufacturing Index also arrives at 10 a.m. ET.
- Salesforce ( Announces Profits After US Markets Close. )
- Oil prices are struggling to find direction after OPEC and Russia delayed until Thursday a difficult demand to start pumping more crude.
Coming tomorrow: Snowflake, the cloud data company whose stock has climbed more than 170% since its IPO in September, shares its latest results.