Barclays Research has released the 66th edition of the Equity Gilt Study (EGS), a flagship annual publication. Combining market-leading macro analysis with a unique multi-asset dataset spanning over 100 years, this year’s report examines how markets and society may evolve after COVID-19.
In a chapter on monetary and fiscal policy, economists and strategists explore the risks of a disorderly unwinding of the extraordinary stimulus programmes put in place in the US and euro area to counter the effects of the pandemic. Inflation spikes and elevated debt loads could test policymakers credibility as they navigate the trade-offs between supporting growth and preventing economies from overheating. Despite these risks, Barclays’ strategists expect an orderly unwind to be the most likely outcome.
In a chapter on debt sustainability, Barclays strategists consider whether the benign outcomes for the US and Europe can be repeated worldwide. They argue that debt loads eventually matter, but more in some countries than others. They see low-growth, high-rate emerging market economies such as Brazil, Turkey and Peru as especially vulnerable to credit events over the next decade.
Away from debt dynamics, Barclays analysts focus on restrictions on mobility and how the virus and its variants have impaired people’s ability to move across international borders without friction. A state of semi-permanent restrictions such as testing requirements and vaccine passports could lead global mobility to contract, affecting emerging economies disproportionately. Domestic tourism, on the other hand, could benefit.
The report also digs into the new world of work. As employers and employees shift to more flexible models, Barclays experts weigh the implications for real estate and retail. The report finds that demand for offices could drop by up to 20%, while the residential property market will likely be buoyed for years to come.
Commenting on the launch of this key report, Jeff Meli, Global Head of Research at Barclays said:
“In this year’s Equity Gilt Study, Barclays experts explore how the coronavirus crisis has reshaped the macro landscape, posing new dilemmas for policy-makers in developed and emerging markets, as they balance the need to support growth while keeping inflation in check. We also look at how the pandemic has permanently altered global mobility and office working.”