Cash flows, V-shaped recoveries, and cryptocurrency

Investment banks are projecting historic declines in GDP growth amidst widespread national lockdowns. Some estimates call for as much as a 40% drop in Q2 GDP. Goldman Sachs recently put out a note that they expect earnings-per-share growth to decline 123% YoY for Q2, and 33% YoY for the full year 2020.

So with this as the backdrop, why are equity markets surging off their recent lows and down just 22% from their all-time highs?

(Source: Liz Ann Sonders)

The prospect of a V-shaped recovery

There are many drivers of the recent rally including central bank support measures, fiscal stimulus, and signs of flattening coronavirus case curves, but perhaps the most important and related driver markets are pricing in is the prospect of a V-shaped recovery. Goldman Sachs outlines this scenario below.