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Central banks expanded interventions to counteract the effects of the virus-induced global downturn have resulted in global equity prices, at, or, near record-high levels. These money wizards have printed trillions of dollars, plowing the money into financial markets to create an illusion that the worst global downturn on record is nothing more than a blip. 

However, the World Trade Organization’s (WTO) Goods Trade Barometer registered a record low in June, confirming the decline in global merchandise trade in 2Q20 and suggests the recovery phase remains challenging: 

“Additional indicators point to partial upticks in world trade and output in the third quarter, but the strength of any such recovery remains highly uncertain: an L-shaped, rather than V-shaped, the trajectory cannot be ruled out,” said the WTO.

June’s Goods Trade Barometer reading is at 84.5, 15.5 points below the baseline of 100 and down 18.6 points year-on-year. The current reading is in line with WTO’s June trade forecast of an 18.5% drop in merchandise trade volumes in the second quarter. It also said the full-year decline would be “less pessimistic” of about -13%. 

Nevertheless, the Goods Trade Barometer set a record low reading in June:

“This reading – the lowest on record in data going back to 2007, and on par with the nadir of the 2008-09 financial crisis – is broadly consistent with WTO statistics issued in June, which estimated an 18.5% decline in merchandise trade in the second quarter of 2020 as compared to the same period last year,” the WTO said.

WTO said, “all the barometer’s component indices remain well below trend, with many registering record lows, but some have begun to stabilize. Indices for automotive products (71.8) and air freight (76.5) are by far the worst on record since 2007. Container shipping (86.9) also remains deeply depressed. Export orders (88.4) show signs of recovery as this index has turned upward. Meanwhile, indices for electronic components (92.8) and agricultural raw materials (92.5) have held up relatively well.” 

Breakdown of component indices: 

Contrary to the official narrative of a “V-shaped” economic recovery seen around the world – the recovery in the US, China, and Europe is stalling.

Investor faith that central banks have effective monetary tools to produce a robust and timely recovery is merely an illusion of elevated asset prices.