It has been one year now since the Covid-19 pandemic disrupted the world. It changed our lives, but financial markets seem to have side-lined this dramatic event as a temporary pullback, which was quickly recovered and forgotten as most risk assets achieved new highs.

Hopes persist that a “here and now” vaccine will rescue the global economy and overshadow unexciting recent economic data and the uncertainties of the virus cycle. This translates into an unprecedented divergence between markets and the real economy, raising questions about the sustainability of current valuations.

Central banks’ extraordinary monetary reaction to disinflation, and then deflationary tensions, has been the key market driver of the regime that followed the Great Financial Crisis. This has sanctioned the victory of monetary and liquidity factors over real factors.

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