Europe May Be Lower for Even Longer

As we mark the end of a year that was truly one for the record books, we celebrate with the prospects of new vaccines and an eventual end to the pandemic. However, after the euphoria subsides, markets will ultimately need to come to terms with the likely longer-term impact of COVID-19 on the global economy. Prior to the pandemic, many developed markets were wrestling with structural issues like lackluster growth, slowing productivity, low inflation, challenging demographic trends, aging infrastructure, and the impact of rapidly changing technology. Europe, in particular, was facing unique challenges, including keeping the bloc together amid rising populism, uneven economic growth, troubled banking systems, Brexit, and more. While the core of Europe was likely facing prospects of negative interest rates for an extended period, COVID-19 may have pushed back a return to positive territory even further. A look at interest rate futures currently suggests Europe may not see positive rates until the end of the decade

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