The Federal Reserve wants financial conditions to remain accommodative as it looks to support the U.S. recovery.

European measures applied to mitigate the effects of the pandemic have contained the unemployment rate in Europe more than in the U.S. While recognizing economic risks from the rising number of COVID-19 cases in the U.S., our forecast sees this success ratio reversing before the end of the year.

We expect more stimulus, both monetary and fiscal, will be necessary to support the recovery amid the renewed COVID-19 outbreak.

While a near-term mechanical bounce in economic activity in response to the lifting or easing of lockdown measures looks likely, we expect the subsequent climb up to be long and arduous.

We expect the Federal Reserve will continue to conduct asset purchases at its current pace through year-end, and eventually commit to keeping interest rates on hold through 2023. This should help ensure easy financial conditions and support the economic recovery.

The coronavirus pandemic has brought about a new investment landscape in which some companies and sectors have fared better than others. Significant market dislocations have also created potential opportunities in the higher quality areas of the credit spectrum.

The COVID-19 crisis is likely to accelerate many underlying, secular disruptive forces already affecting economies and financial markets. This may only increase the difference between those companies, sectors, and countries that are being disrupted, and those that are acting more like disruptors. Distinguishing between the two is becoming crucial.

The U.S. political focus has shifted to the reopening of the economy.

A committed and decisive fiscal/monetary partnership to tackle the economic crisis is urgently needed, but Europe continues to lag behind. European policymakers face a moment of truth.

Over the next several quarters, monetary conditions will likely be set not only by Fed balance sheet policies, but also by the expected path of interest rates.

With euro area output expected to drop by almost 10% this year, and unemployment and fiscal deficits to rise, an ample, blunt and well-coordinated response from European ministers was warranted. However, the new measures announced by finance ministers last week disappointed – again.

Evidence from decades and even centuries ago, plus the unique circumstances of the current global health crisis and its economic impact, suggests we can expect a “New Neutral 2.0” of lower interest rates for longer.