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In the first half of 2021, the world economy seems to have rebounded to above its pre-pandemic peak, transitioning from the recovery phase to the start of a new economic expansion. Europe is poised to outperform – according to economists at Charles Schwab – as the new economic cycle has seen stock market leadership pass from the US to Europe.

Peak or Pause?

“European countries are only now starting to ease their restrictions on economic activity just as Europe’s largest-ever stimulus plan is about to be deployed. This suggests eurozone growth still has some way to go before peaking, and that eurozone stocks likely can still deliver further gains after outperforming in the first half of the year.”  

“Continued solid growth combined with signs that inflationary pressure may be transitory could ease concerns that central banks will tighten policy prematurely, a fear that weighed on emerging market stocks in the first half of the year.”

“Eurozone economies have performed strongly, even though vaccination programs lagged those in the US. Ending restrictive lockdowns, ramped-up bond-buying by the European Central Bank, and the nearing rollout of Europe’s largest-ever stimulus plan should aid growth heading into the second half of 2021. This could mean the peak in eurozone economic momentum may not come until later this year, unlike other major economies such as the US, where growth may have peaked in the second quarter of this year, or China where it apparently peaked in the fourth quarter of last year.”

“Among the risks to economic expansion is the prevalence of COVID-19 variants, and potential for antibodies to wane over time, which could lead to waves of infection in the late fall/winter.”