Aggressive action by several central banks and governments helped reduce the extreme tail risk that had seemed so dominant in the second half of March. Strains in the funding markets eased, and equity markets recouped some of the steep losses inflicted during the frenzied panic. To be sure, most major economies were largely shut down in April, and the lagging economic data is dreadful.
It was only in the second half of April that some social distancing was lifted in some places in Asia, Europe and the U.S. China’s data showed that the economy contracted by nearly 10% in the first quarter but did show the pace moderated in March. Still, China’s experience suggests that even after the shutdown is lifted, people’s consumption patterns, like patronizing restaurants, have not recovered much, as people do not feel safe yet.