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Fifty Years of Economic History Say Expect L, Not V, for Recovery

Goodbye V, Hello L

The idea of a V-shaped recovery, where an economy returns to its pre-crisis path following a recession, is embedded in central bank models and entrenched in investors’ thinking. But a Bloomberg Economics analysis of 36 recessions since 1965 across the Group-of-Seven countries suggests an L-shaped recovery is more likely than a V. With the world facing a second wave of Covid infections this winter, it’s not hard to imagine how the pandemic could inflict significantly more long-term damage than forecasters envisage.