The outbreak at the end of 2019 is the most serious public health crisis in the world. The focus of the current market has shifted to the post-epidemic era and priced this prospect. The impact of short-term outbreaks and data fluctuations on the market has become less and less.

How to assess the medium-and long-term impact of the epidemic? For economic activities, the impact of the epidemic on two aspects is more prominent, and will exist for a long time, the change of this macro scene will also have an important impact on the market.

1. Epidemic situation and precautionary savings

Like all natural disasters (such as floods, earthquakes, plagues, etc.), the epidemic will eventually pass, but the epidemic will have a long-term impact on individual psychology. The final economic behavior of this impact is that individual risk preference and risk tolerance will be greatly reduced, and the savings rate will rise for a long time. The change of this behavior pattern is universal among individuals in different countries.

This change in behavior pattern has been repeatedly seen and confirmed in Chinese data, while foreign data are being interpreted, and the final results still need time to confirm. However, combined with the study of historical literature, the phenomenon of systematic increase in precautionary savings after the disaster is quite common.

Its impact on the economy is: compared with before the epidemic, the savings rate of China's household sector is about 2 percentage points higher than the normal level, regardless of the multiplier effect and the decline in willingness to invest, its drag on GDP may be 1 percentage point. Therefore, the economic growth center was 6% before the epidemic, and under the same other factors, the economic growth center (two-year compound growth rate) will fall back to about 5% after the epidemic.

After the normalization of social life, the decline of the economic growth center and the systematic rise of the savings rate may lead to a significant decline in the interest rate center that the economy can maintain.

Us market data are pricing this prospect, such as the return of real interest rates on 10-year Treasuries to near historic lows, significantly lower than they were before the outbreak.

According to European and Japanese data, the same pricing is being made. As overseas vaccines are gradually vaccinated, interest rates are generally falling.

How long will this systemic decline in the savings rate last? How long will low interest rates last? This mainly depends on the pace of the rebound in human risk appetite. From historical experience, the decline of human risk appetite after disaster will exist for a long time. For example, take SARS as an example. Half a year after the complete end of SARS, the savings rate of urban residents in Beijing returned to normal. Judging from this example, preventive savings are likely to persist this year and next, suppressing the economic and interest rate hubs.

2. The impact of the epidemic on capital stock.

In addition to killing millions of people, the impact of the epidemic on the economy has also had a huge impact on the capital stock. The impact of the epidemic on the capital stock is as follows: on the one hand, it causes some enterprises to go bankrupt because of broken cash flow; on the other hand, most enterprises have no new investment during the epidemic, and investment activities are postponed and cancelled. Both of these aspects mean a systematic decline in the supply capacity of the economy, accompanied by a rise in the central hub of inflation, and superimposed factors such as carbon emission reduction, making the upward pressure on the price center more prominent.

The disruption to supply capacity varies from industry to industry, with greater impact on the upstream and relatively less impact on the downstream, which makes upward pressure on prices uneven in the process of economic recovery. After the impact of some short-term factors, it will be found that long-term supply constraints, such as corporate closures, carbon-neutral promotion, population death, these effects will persist for a long time, which will push up the central level of inflation.

Therefore, in terms of consolidation, the medium-and long-term impact of the epidemic on the economy is that due to the systematic downward shift of residents' propensity to consume after the disaster (or the persistence of precautionary savings), the center of economic growth will be lower than that before the epidemic. The economy can maintain a significant decline in the interest rate hub; and the medium-and long-term impact of the epidemic on economic supply capacity will push up the inflation center of the economy as a whole. At present, inflation expectations in the United States have reached historical extremes, the market expects the inflation hub to rise over the next decade, while real interest rates are at historic lows, and the market is pricing this macro pattern.