While robust October momentum keeps risks biased to the upside of our cur-rent-quarter forecast for a 3.1% ar global GDP gain, a significant downshift in growth is underway. COVID-19 drags hit consumer spending readings in the most affected countries last month as US and UK retail sales and DM auto sales posted significant declines. Virus containment measures also are being increased or extended. On the surface, the news appears at odds with this month’s impressive appreciation in global asset and commodity prices. How-ever, we and the markets are both looking through the near-term soft patch. The early rollout of effective vaccines bolsters confidence that the COVID-19 second wave will be short-lived and that mass vaccinations set the stage for a sustained recovery in economic activity starting in 2Q21. Optimism is en-hanced this week by a dimming of no-deal Brexit risks and signs that an earli-er-than-expected US fiscal relief package will be passed in the coming days. Even with a 1Q drag, we still look for global GDP to boom 4.8% (4Q/4Q) next year, the fastest gain in over two decades.  

The promise of robust global growth is kindling reflation hopes. In the US, medium-term inflation compensation has fully reversed a concerning slide that began in 2019 (Figure 1). We agree that reflation prospects have im-proved as strong global growth could amplify central bank low-for-long rate policies by lifting r*. Our recently published analysis argues for patience however, as global reflation likely faces three impediments over the coming year.