New growth realities Embracing "kairos" - August 2020 - Deutsche Bank Wealth Management

 
New growth realities Embracing "kairos" - August 2020 - Deutsche Bank Wealth Management
New growth realities
                                           Embracing “kairos”
                                                                              August 2020

                                    Chief Investment Office International Private Bank &
                                                           Government & Regulatory Advocacy

In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   1
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
New growth realities Embracing "kairos" - August 2020 - Deutsche Bank Wealth Management
Executive summary

COVID-19 and associated lockdowns have hit the global economy hard.
Attention is now shifting to economic recovery and what it will mean.

The crisis has demonstrated that new growth realities will be determined
not only by economic and financial issues, but also by social and political
needs. This is indeed an opportune moment for change – what the ancient
Greeks called “kairos”.

This report looks first at the measurable impact of COVID-19 on global
economies. We then look at how the crisis has accelerated implementation
of pre-existing trends in trade, digitalization and the future of work, and at
the increasing importance of ESG. Finally, we identify policy implications
and the key economic and political dimensions that will define our future
world.

Source: Deutsche Bank AG.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   2
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
New growth realities Embracing "kairos" - August 2020 - Deutsche Bank Wealth Management
01                                                                                    02

     The idea                                                                              Impact on
     of kairos                                                                             economy & markets

     03                                                                                    04                                                                                      05

     Future of                                                                              ESG and                                                                                Policy
     work & trade                                                                           conservation                                                                           implications
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   3
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
New growth realities Embracing "kairos" - August 2020 - Deutsche Bank Wealth Management
01                                                                                     02

                                                                                             Impact on
                                                                                             economy & markets

      The idea
      of kairos
      03                                                                                04                                                                                     05

     Future of                                                                          ESG and                                                                                Policy
     work & trade                                                                       conservation                                                                           implications

In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   4
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
New growth realities Embracing "kairos" - August 2020 - Deutsche Bank Wealth Management
Is it time for change?

                                                                               The needs of the global
                                                                               economy provide a moment
                                                                               of “kairos” to take policy
                                                                               change further

                                                                           kairos =                           A moment where things could change substantially

Source: Deutsche Bank AG.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   5
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
New growth realities Embracing "kairos" - August 2020 - Deutsche Bank Wealth Management
What is today’s new reality?
    • COVID-19 has forced major changes to how we live and work, and has posed
      questions about how societies should operate in the future.
    • Looking at financial markets, the post-coronavirus world is likely to be
      characterized by lower yields for even longer, despite higher borrowing.
    • At a corporate level, those sectors best able to adapt will fare better and we are
      likely to see failures elsewhere. Corporate earnings have already fallen sharply.
    • Substantial and long lasting changes in consumer demand and work dynamics are
      likely to benefit sectors such as IT and healthcare.
    • Following long-term investment themes may help navigate this difficult landscape.

Source: Deutsche Bank AG.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   6
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
New growth realities Embracing "kairos" - August 2020 - Deutsche Bank Wealth Management
01                                                                                    02

     The idea
     of kairos

                                                                                           Impact on economy
                                                                                           & markets

      03                                                                                   04                                                                                     05
     Future of                                                                             ESG and                                                                                Policy
     work & trade                                                                          conservation                                                                           implications
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   7
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
New growth realities Embracing "kairos" - August 2020 - Deutsche Bank Wealth Management
Global growth and inflation outlook
 (YoY %)

WESTERN                                                                               Germany                             China                                                                   EASTERN
HEMISPHERE                                                                            2020 F       2021 F                 2020 F       2021 F
                                                                                                                                                                                               HEMISPHERE
                                                                                      -6.0         4.5                    1.0          9.0
                                                                                      -0.2         1.2                    2.8          1.8

      U.S.A.                                                                        Eurozone                              Japan
      2020 F       2021 F
                                                                                    2020 F       2021 F                   2020 F       2021 F
      -5.7         5.6
                                                                                    -7.5         4.5                      -5.5         3.3
      1.2          2.1
                                                                                    -0.3         1.0                      -0.3         0.1

Source: Deutsche Bank AG. Forecasts as of May 28, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   8
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
New growth realities Embracing "kairos" - August 2020 - Deutsche Bank Wealth Management
Growth disparities between countries

     GDP growth, % YoY annualized

      10%
                                                                                                                                         Low growth
                                                                                                                                         • The U.S. economy is experiencing a sharp
        5%                                                                                                                                 recession from the lockdown effects despite the
                                                                                                                                           unprecedented fiscal and monetary response.
                                                                                                                                           We do not expect U.S. GDP to return to pre-
        0%                                                                                                                                 crisis levels until 2022.
                                                                                                                                         • In the Eurozone, economic lockdowns should
                                                                                                                                           lead to a cut in major economies’ annual GDP
       -5%                                                                                                                                 growth of between -6% and -10% YoY for 2020.
                                                                                                                                           We expect Eurozone GDP to contract by -7.5%
                                                                                                                                           YoY in 2020, and increase by +4.5% in 2021.
    -10%                                                                                                                                   Increased debt levels pose the risk of another
                                                                                                                                           Eurozone debt crisis over the longer term.
                                                                                                                                         • We expect the UK economy to contract by -8%
    -15%                                                                                                                                   YoY in 2020 and to rebound to +6.5% YoY in
                                                                                                                                           2021.
                                                                                                                                         • Japan has experienced a relatively muted virus
    -20%                                                                                                                                   outbreak, which should lead to a less dramatic
                        U.S.               Eurozone                    UK                  Japan                   China                   (but still severe) hit to its economy than other
                                                                                                                                           DM countries.
                                Q3 2019              Q4 2019              Q1 2020              Q2 2020
                                                                                                                                         • China’s Q2 GDP turned positive at +3.2% YoY, a
                                                                                                                                           sharp turnaround from Q1 and higher than
Footnotes: Q2 2020 GDP growth for UK and Japan are Bloomberg Finance L.P consensus estimates.                                              consensus.
Forecasts as of May 28, 2020. Source: Deutsche Bank AG. Data as of August 5, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   9
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
New growth realities Embracing "kairos" - August 2020 - Deutsche Bank Wealth Management
How may GDP growth develop?

    Recovery scenario, GDP trend

      Illustrative example                                                                                         Implications

                                                                                                                                      Restrictions
                                                                                                                                      2-3 months of restrictions & lifted over
                                                                                                                                      following 3-6 months. Further local lockdowns
                                                                                                                                      possible.

                                                                                                                                      Macro
                                                                                                                                      Global recession, stabilization end 2020,
                                                                                                                                      recovery expected in 2021.

    2017              2018             2019             2020             2021             2022
                                                                                                                                      Labour market
                  Real GDP                  Pre-Corona Trend                     Real GDP forecast                                    Programmes against unemployment likely to
                                                                                                                                      support consumption.

Source: Deutsche Bank AG. Data as of July 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   10
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
What a typical recession looks like
  Shift in quantity & prices

    Supply and demand – typical recession

       120
                    Illustrative example                                                                                                    Dynamics
       110
                                                                                                                                            DEMAND
                                                                                                                                            •  Savings rate increases, consumption
       100
                                                                                                                                               decreases as people are afraid of losing
                                                                                                                                               their jobs
            90
                                                                                                                                            •  Demand curve shifts to the left
            80
                                                                                                                                            SUPPLY
    Price

                                                                                                                                            •  Producers lower prices to sell goods
            70
                       New equilibrium                                                                                                      EQUILIBRIUM
            60
                                                                                                                                            •  Lower quantity at lower prices
            50
                                                                                                                                            IMPLICATIONS
                                                                                                                                            •  Central banks cut interest rates to make
            40
                                                                                                                                               saving less attractive. Fiscal policy steps
                                                                                                                                               in to strengthen aggregate demand
            30
                   50       60       70      80       90      100 110 120 130 140 150
                                                          Quantity
                       Demand                     Supply                  Demand Recession

Source: Deutsche Bank AG, DWS Investment GmbH. Data as of July 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   11
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
What the current recession looks like
   Deflationary in the short term

    Supply and demand – COVID-19 recession

             120                                                                                                                           Dynamics
                      Illustrative example
             110
                                                                                                                                           DEMAND
             100                                                                                                                           •  Savings rate increases, consumption
                                                                                                                                              decreases as people are afraid of losing
             90                                                                                                                               their jobs
                                                                                                                                           •  Demand curve shifts to the left
             80
     Price

                                                                                                                                           SUPPLY
                          New
             70                                                                                                                            •  Capacity is cut massively (fewer people in
                          equilibrium
                                                                                                                                              planes, trains, restaurants, etc.)
             60                                                                                                                            •  Supply curve shifts to the left
             50
                                                                                                                                           EQUILIBRIUM
                                                                                                                                           •  Big drop in quantity at (slightly) lower
             40
                                                                                                                                              prices
             30
                     50       60       70      80       90 100 110 120 130 140 150                                                         IMPLICATIONS
                                                                                                                                           •  Monetary as well as fiscal stimulus mainly
                                                   Quantity
                                                                                                                                              focused on the supply side
                                 Demand                        Covid-19 Recession Demand
                                 Supply                        Covid-19 Supply

 Source: Deutsche Bank AG, DWS Investment GmbH. Data as of July 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   12
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Asian economies: mixed PMI recovery

    Manufacturing PMIs

     60
                                                                                                                                            Asia

     55                                                                                                                                     • The regional economy is seen shrinking this
                                                                                                                                              year, due to the impact of domestic
     50                                                                                                                                       containment measures and lockdowns abroad
                                                                                                                                              hitting exports and tourism.
                                                                                                                                            • Tourism and trade as main income sources
     45                                                                                                                                       most affected – tourism even after reopening
                                                                                                                                              expected to decrease by 50-70%.
     40                                                                                                                                     • Downside risks include a second wave and
                                                                                                                                              prolonged weak external demand.
     35                                                                                                                                     Russia

     30                                                                                                                                     • With the introduction of lockdown measures,
                                                                                                                                              Russia slipped into a recession, affected by
                                                                                                                                              domestic demand shocks against a backdrop
     25
                                                                                                                                              of already weak external demand. PMI
          May-19         Jul-19       Sep-19 Nov-19 Jan-20 Mar-20 May-20                                  Jul-20
                                                                                                                                              indexes fell to a record low.
                            India                             China                             South Korea                                 • We expect GDP growth in Russia to be -4% in
                            Taiwan                            Singapore                         Vietnam                                       2020 and rebound to +3.5% in 2021.
                            Malaysia                          Indonesia                         Russia

Source: World Bank, Bloomberg Finance L.P, Deutsche Bank AG. Data as of August 3, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   13
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
LatAm and Africa structural struggles

     Real annual GDP and forecasts (YoY)

    6%                                                                                                                                     Latin America

    4%                                                                                                                                     • The pandemic will push the region to its worst
                                                                                                                                             economic contraction in over a century.
                                                                                                                                           • The impact on growth will be through
    2%
                                                                                                                                             disruption of value chains and collapse in
                                                                                                                                             commodity prices, and the sudden stop in
    0%                                                                                                                                       production and activity domestically.
                                                                                                                                           • Limited fiscal capacity to counter the effects
  -2%                                                                                                                                        of the crisis clouds the outlook further and will
                                                                                                                                             limit the expected rebound in 2021.
  -4%                                                                                                                                      • High poverty, inequality and informal workers
                                                                                                                                             pose vulnerabilities to economies.
  -6%
                                                                                                                                           Africa

  -8%                                                                                                                                      • Infections and deaths are rather low but
                                                                                                                                             economies are vulnerable due to external
                                                                                                                                             shocks (subdued commodity prices, looming
                                                                                                                                             food crisis and volatility in financial markets).
                                                                                                                                           • Continuing gradual easing of restrictions and
                                          FY2019            FY2020 e            FY2021 e                                                     coordination with development partners
                                                                                                                                             assists economic recovery.
Source: Bloomberg Finance L.P, Deutsche Bank AG. Data as of July 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   14
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Magnifying pre-existing uncertainty

    World Uncertainty Index (GDP weighted average)

     450
                                                                                                       Coronavirus                          COVID-19 has accelerated pre-existing trends
     400                                                                                                                                    as captured by the World Uncertainty Index. It
                                                                                                                                            examines uncertainty related to economic and
                                                             U.S.-China trade tensions, and Brexit                                          political events since 1960. The trend was
     350
                                                                                                                                            already increasing pre-COVID-19, and in
                                                                             U.S. presidential elections
                                                                                                                                            March 2020 it skyrocketed.
     300                                                    Sovereign debt crisis in Europe                       Brexit
                                         Iraq war and outbreak of SARS
     250
                                                                                                 Financial
                                                     U.S. recession and 9/11                     credit
     200
                                                                                                 crunch

     150

     100

       50

         0
           Q2           Q4          Q2          Q4          Q2           Q4          Q2          Q4          Q2           Q4
          1960         1966        1973        1979        1986         1992        1999        2005        2012         2018

Source: Datastream, IMF Deutsche Bank AG. Data as of July 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   15
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Balancing risks and supports

    Risks                                                                                                                                                                                             Supports

    COVID-19:                                                                                                                                                                                          COVID-19:
    •     Second wave of infections                                                                                                                       • Vaccine may be available soon
    •     Different strains                                                                                                                        •     Therapies help treatment of illness
    •     Another round of lockdowns
                                                                                                                                                                                                         Economy:
    Economy:                                                                                                                                          • Fiscal and monetary stimulus
    •     Fiscal fatigue                                                                                                                   •     Thematic and corporate winners, such
    •     Monetary ineffectiveness                                                                                                               as ESG, Healthcare & Tech companies
    •     Long term changes in consumption behaviour

Source: Deutsche Bank AG. Data as of end June, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   16
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Eurozone joblessness to pick up

    Eurozone unemployment rate and wage growth

    13%                                                                                                                      4%
                                                                                                                                            Eurozone unemployment rate vs. wage growth
    12%                                                                                                                      4%
                                                                                                                                            In times of low unemployment, employees have
                                                                                                                                            a higher bargaining power, which results in
    11%                                                                                                                      3%             higher wages.

    10%                                                                                                                      3%             Economic downturns and deteriorating labour
                                                                                                                                            markets have the effect that in the medium
      9%                                                                                                                     2%             term the pace of wage growth decelerates.
                                                                                                                                            Therefore, there is a negative correlation
                                                                                                                                            between unemployment rates and wage growth.
      8%                                                                                                                     2%

                                                                                                                                            As the recovery of the Eurozone unemployment
      7%                                                                                                                     1%             situation is likely to stay sluggish, the wage
                                                                                                                                            growth rate is following the relationship
      6%                                                                                                                     1%             described above. We expect this to stay muted
                                                                                                                                            in the coming months.
      5%                                                                                                                     0%
           2000       2002       2004      2006       2008       2010      2012       2014       2016      2018       2020

                                            Eurozone unemployment rate (lhs)
                                            Eurozone wage growth (YoY, rhs)

Source: Deutsche Bank AG, Datastream. Data as of July 27, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   17
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
U.S. labour market deterioration

    U.S. unemployment rate and wage growth

    16%                                                                                                                    9%
                                                                                                                                            U.S. unemployment rate vs. wage growth
    14%                                                                                                                    8%
                                                                                                                                            The situation in the U.S. differs from the one in
                                                                                                                           7%               the Eurozone, as we observe a positive trend for
    12%                                                                                                                                     both unemployment rate and wage growth.
                                                                                                                           6%
    10%                                                                                                                                     Due to the pandemic, many workers were laid
                                                                                                                           5%               off in a very short period of time, particularly in
      8%                                                                                                                                    low-paid sectors such as leisure and retail, which
                                                                                                                           4%               were the hardest hit by the lockdowns. The
                                                                                                                                            layoffs were much higher than in the Eurozone,
      6%
                                                                                                                           3%               explained by the U.S. labour market being less
                                                                                                                                            rigid overall. Therefore, despite the overall
      4%                                                                                                                                    increase in unemployment, average hourly
                                                                                                                           2%
                                                                                                                                            earnings surged as a large share of low income
      2%                                                                                                                   1%               workers were out of the workforce.

      0%                                                                                                                   0%
        2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

                                          U.S. Unemployment Rate (U-3, lhs)
                                          U.S. Wage Growth (YoY, rhs)

Source: Deutsche Bank AG, FactSet. Data as of July 24, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   18
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Recovery confidence greatest in China

    Share of adults who are confident in their country's economic recovery from COVID-19 in 2020

     120%

     100%                                                                                                                                                                                                  4%
                                                                                                                                                        13%
                                                                                                                                                                                 16%
                                                                                                                               25%
                                                                                                      30%
       80%                                          39%                      36%
                          41%
                                                                                                                                                                                                          44%

       60%                                                                                                                                                                       48%
                                                                                                                                                        63%
                                                                                                                               59%
       40%                                                                                            59%
                          47%                       51%                      54%

                                                                                                                                                                                                          52%
       20%
                                                                                                                                                                                 35%
                                                                                                                                                        24%
                                                                                                                               17%
                          12%                       10%                      10%                      12%
         0%
                         Spain                   France                      Italy                Portugal                      UK                  Germany                      U.S.                    China

                                                                                      Optimistic             Unsure             Pessimistic

Source: Statista, Deutsche Bank AG. Data as of July, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   19
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Higher debt is unavoidable
Continuing the stimulus comes at a big cost. Governments of wealthy nations have launched stimulus programs, with a
significant portion either subsidizing work or compensating people who lose it. Before the year end, government deficits in
these countries will likely be in double digits.

    Fiscal balance, % of GDP                                                                                      Government debt, % of GDP

    5
                                                                                                                  180

                                                                                                                  160
    0
                                                                                                                  140

                                                                                                                  120
   -5
                                                                                                                  100

                                                                                                                    80
 -10
                                                                                                                    60

 -15                                                                                                                40

                                                                                                                    20

 -20                                                                                                                  0

                                2019               2020 e             2021 e                                                                          2019             2020 e           2021 e

Footnotes: 2020 and 2021 are OECD forecasts.
Source: OEC, Deutsche Bank AG. Data as of July, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   20
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Central banks and the crisis

How have central banks supported their economies?

Monetary
policies                          EU NOR SWE CHE GBR U.S. AUS HKG JPN KOR SGP CHN IND                                                                                                BRA MEX RUS TUR
Promotes stable
economic growth
through control of
the money supply

Policy rate
cuts
Central bank
liquidity support
Central bank
swap lines
Central bank asset
purchase schemes

    Eurozone                     Europe                    North America                        Asia                Emerging Markets

Source: The Visual Capitalist, Deutsche Bank AG. Data as of July 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   21
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
QE at record high this year
                                    Market expectations of total
                                        global QE in 2020
                                            = $6 trillion
                       Equivalent to the combined GDP of India, UK and Mexico

Source: Bloomberg Finance L.P, Deutsche Bank AG. Data as of July 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   22
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Keeping inflation under control

    Bank of England historical CPI data
    60
                                                                                                                                            A demand and supply shock
    50
                                                                                                                                            Since the abandonment of the gold standard
    40                                                                                                                                      early in the 20th century we have been living in
                                                                                                                                            an inflationary world, although inflation has
    30
                                                                                                                                            generally been kept well under control in this
    20                                                                                                                                      century.

    10                                                                                                                                      Central banks aim for constantly low inflation
                                                                                                                                            rates over time, which is why they also focus on
      0                                                                                                                                     market-implied inflation expectations, which fell
                                                                                                                                            sharply at the start of the COVID-19 crisis.
   -10

   -20
                                                                                                                                            The external shock of COVID-19 has heavily
                                                                                                                                            impacted the global economy on both the
   -30                                                                                                                                      supply and demand side.

   -40
                                                                                                                                           *Please watch inflation in a global context!*
          1210

                 1271

                        1332

                                1393

                                       1454

                                               1516

                                                      1576

                                                             1637

                                                                    1698

                                                                            1759

                                                                                   1820

                                                                                           1882

                                                                                                  1941

                                                                                                         2002

                               Annual inflation rate in the UK 1210-2019 (%)

Source: Bank of England, Deutsche Bank AG. Data as July, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   23
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Declining core inflation globally

    Core consumer price inflation (YoY)
    4%
                                                                                                                                           The challenges ahead

    3%                                                                                                                                     Short term – disinflationary trends
                                                                                                                                           We expect inflation to remain under downwards
                                                                                                                                           pressure from depressed demand, and
    2%                                                                                                                                     continuing unemployment is likely to weigh on
                                                                                                                                           any consumer price increase in the short term.
                                                                                                                                           Some government policy initiatives may also
    1%                                                                                                                                     directly depress inflation temporarily. One
                                                                                                                                           example would be the German decision to
                                                                                                                                           reduce VAT rates (and thus prices) to encourage
    0%
                                                                                                                                           consumption.

   -1%                                                                                                                                     Long term – inflationary trends
                                                                                                                                           We do not foresee sharp increases in overall
                                                                                                                                           rates of inflation. But prices could rise in some
   -2%                                                                                                                                     economic sectors due to monetary policy
      2010                             2013                           2016                           2019                                  support, a recovery in demand, higher taxes and
                                                                                                                                           the impact of de-globalization.
                                                                                                                                           • Advantages: lower unemployment, fall in
              U.S. Core CPI (YoY)                                       Eurozone Core CPI (YoY)
                                                                                                                                              national debts, more politically popular
              Japan Core CPI (YoY)                                      UK Core CPI (YoY)                                                  • Disadvantages: higher inflation would imply a
              China Core CPI (YoY)                                                                                                            retreat in globalization due to less offshoring
Source: Deutsche Bank AG, Datastream; Data as of July 27, 2020.                                                                               of production
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   24
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Positive yields require risk acceptance

    Lower yields for even longer

   6%                                                                                                                     10                Lower yields for even longer
                                                                                                            5.6%

                                                                8.8
                                                                                                                          9                 For Treasury yields, heavy supply should be
   5%                                                                                          4.6%                                         met with strong demand as cautious market
                                                                                                                          8
                                                                    4.2%         4.3%                                                       sentiment continues to provide pricing support.
                                                                                                                          7
   4%
                                                                                                                          6                 In global IG Credit, spreads have moved
                                                  5.4                                                                                       significantly down from their recent highs but
   3%                                                                                                                     5                 are still offering value. Sobering economic data
                        4.8
                                                                                               5.0                                          will be offset by dovish central bank policies
                                     3.9                                                                                  4
                                                       1.9%                                                                                 and sizable asset purchases.
   2%                                                                 3.9
                                                                                   3.7                        3.6         3
                                                                                                                                            However, the likely continued increase in
                                         0.8%                                                                             2
   1%                                                                                                                                       supply could make the technical backdrop less
                            0.3%                                                                                          1                 constructive. In HY, current spreads are likely
                                                                                                                                            to compensate for any energy-related concerns
   0%                                                                                                                     0
            JPM GBI JPM GBI iBoxx Euro Bloomberg iBoxx EUR iBoxx EUR JPM GBI- Bloomberg                                                     in the near term.
           Euro 1-10Y US 1-10Y Corporates Barclays  HY Main Liquid High     EM       Barclays
                                             U.S.   Crossover Yield Index Composite    U.S.
                                          Corporate                                 Corporate
                                         Investment                                 High Yield
                                            Grade

                                  Yield (lhs)            Duration in years (rhs)

Source: Bloomberg Finance L.P, Deutsche Bank AG. Data as July 27, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   25
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Recovery in earnings to come in 2021

    S&P 500 EPS (cons. exp., DB estimates in orange)                                                                        Quarterly earnings by S&P 500 sectors

                                                                                                                                                                                                                    4.9%
   $200                                                                                $189.55                          UT                                                                                          6.9%
                                                                                                                                                                                                                   2.4%
                                                                                                                        HC                                                                                         2.0%
                                                                               $162.28
                                                                                                  $167                                                                                                -0.5%
   $160                                                                                                                   IT                                                                                      0.8%
                                                                                           $150                                                                                                    -8.8%
                                                                                                                         RE                                                                                        3.2%
                                                                        $125.44
                                                                                                                                                                                               -9.6%
   $120                                                                                                                  CS                                                                       -0.3%
                                                                                   $110                                                                                                  -23.0%
                                                                                                                   COMS                                                                          -2.5%
                                                                                                                                                                                      -32.1%
                                                                                                                        MA                                                                   -11.8%
     $80
                                                                                                                                                                                     -35.7%
                                                                                                                    Index                                                                   -13.6%
                                                                                                                                                                                -53.0%
                                                                                                                         FN                                                                 -13.9%
     $40                                                                                                                                                             -79.2%
                                                                                                                          IN                                                           -36.1%
                                                                                                                                                                   -86.1%
                                                                                                                        CD                                                            -38.4%
       $0                                                                                                                         -165.5%
                                                                                                                        EN                                 -100.7%

                                                                                                                            -200%              -150%               -100%                -50%                  0%                50%

           S&P 500 EPS - historical numbers and consensus forecasts                                                                      Q2 2020 blended EPS growth - S&P 500
           Our S&P 500 EPS forecasts                                                                                                     Q2 2020 blended EPS growth - S&P 500 (as of Jul 31)

Source: Deutsche Bank AG, Bloomberg Finance L.P. Data as of July 20 (left chart) and July 31 (right chart), 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   26
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Keep growth bias, selectivity on value

    3-month price change in %

    16
                                                                                                                                            Growth: superior fundamentals
                  GROWTH SECTORS                                                                                                            •  Only modest earnings revisions in Health
    14                                                                            Information
                                                                                                                                               Care, IT and Communication
                                                                                  Technology
                                                  Materials
    12                                                                                                                                      Value: under-owned
                                                                                                                                            •   Severe EPS cuts (Banks, Energy)
    10                                                                                                                                      •   Low interest rates, low oil price and reduced
                                                                                 Communication                                                  investment spending remain a head-wind
                                                                                   Services
                                                                                                                                            •   But: under-owned and trading at discount
      8                                                S&P 500

      6           VALUE SECTORS                                         Health Care                                                         FOCUS
                                                  Energy                                                                                    •  Technology: structural growth potential
      4                                                                                                                                        accelerated by social distancing & work
                                                                                                                                               from home
                                                                 Industrials
                                                                                                                                            •  Selective cyclical value: Industrials
      2                 Financials                                                                                                          •  Defensive sector preference: Healthcare
                                                                                                 P/E ratio
      0
          10                      15                       20                      25                       30

            Cheap                                                                           Expensive
Source: Deutsche Bank AG, DWS Investment GmbH. Data as of June 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   27
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Currencies vs. USD performance

     Performance vs. USD YTD

     10%
                7%                                                                                                                          The global need for USD liquidity remains
                       5% 5%
                                                                                                                                            elevated
       5%
                                    2%
                                           1%                                                                                               Risk sentiment has emerged as the dominant
                                                  0%                                                                                        driving force in price movements as global
       0%
                                                                                                                                            central banks are now synchronized in
                                                        0%
                                                              -1%
                                                                     -2% -3%
                                                                                                                                            implementing easier monetary policies.
      -5%                                                                    -3% -4%
                                                                                                                                            JPY continues to act as a diversifier and safe-
    -10%                                                                                                                                    haven asset in portfolios and continue to
                                                                                                                                            benefit from risk-off sentiment flows in the
    -15%                                                                                                                                    near term.
                                                                                               -15%
                                                                                                   -17%
    -20%                                                                                                                                    GBP levels over the near term will reflect the
                                                                                                                                            market’s evolving expectations on negotiations
    -25%                                                                                                                                    during the transitional Brexit period and the
                                                                                                            -24%                            UK’s relative economic positioning amongst its
    -30%                                                                                                                                    European peers.

                                                 YTD performance vs USD

MXN=Mexican peso; CAD=Canadian dollar; JPY=Japanese yen; BRL=Brazilian real; NOK=Norwegian krone; SGD=Singapore dollar; SAR=Saudi riyal; CHF=Swiss franc;
CNY=Yuan; GBP=British pound; EUR=Euro; AUD=Australian dollar; KRW=South Korean won; SEK=Swedish krona; TRY=Turkish lira; YTD=year-to-date. Source: Deutsche
Bank AG, Datastream; Data as of August 4, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   28
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Gold remains attractive

    Gold price vs. U.S. Treasury inflation-protected security yields

      2500                                                                                                                3.5
                                                                                                                                            The potential for gold
                                                                                                                          3
                                                                                                                                            Uncertainties surrounding the global pandemic
      2000                                                                                                                2.5               and a prolonged low-interest rate environment
                                                                                                                                            continue to aid gold.
                                                                                                                          2

      1500                                                                                                                1.5
                                                                                                                                            We expect gold prices to remain at elevated
                                                                                                                                            levels in relation to recent history with support
                                                                                                                          1                 coming from a steady demand for safe haven
                                                                                                                                            assets that do not carry negative yields. Lastly,
      1000                                                                                                                0.5               central bank buying will continue to represent
                                                                                                                                            an additional source of demand for gold.
                                                                                                                          0

        500                                                                                                               -0.5

                                                                                                                          -1

            0                                                                                                             -1.5

                           Gold (USD/oz, lhs)                       TIPS Real Yield (%, rhs, inverted)

Source: Bloomberg Finance L.P, Deutsche Bank AG. Data as of July 27, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   29
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
States of play
Biden’s choice of Vice President will be seen as a massive signal of what we can expect of the next generation of Democratic
Party leadership and the policy direction they will take. Currently, Biden may be ahead in polls but we expect significant shifts up
or down in the polls based on his choice. In terms of the Senate control, Democrats need to win four seats to gain control of the
Senate – three if Biden wins as the Vice President serves as a tie-breaking vote in the Senate.

  Joe Biden                   Presidential election, win probability, %

                     Safe
                     99+

                     Very likely                                           WA                                                     ND
                     85-99                                                                               MT
                                                                                                                                                 MN                                                         VT
                                                                                                                                                                                             ME
                                                                                                                                   SD                           WI
                     Likely                                                 OR              ID                                                                               MI          NH
Win probability, %

                     65-85
                                                                                                               WY                                                                    NY
                                                                                                                                                     IA                                  MA
                                                                                                                                   NE                                             PA    CT
                                                                                     NV                                                                           IL     IN OH       NJ
                     Uncertain                                                                     UT                CO                                                        WV DC
                                                                                                                                                                                            RI
                                                                                                                                                                                            DE
                                                                                                                                         KS            MO
                     50-65                                                                                                                                                 KY    VA
                                                                               CA
                                                                                                                                            OK                         TN
                     Likely                                                                                                                             AR
                                                                                                                                                                                       NC               MDElectoral
                                                                                                      AZ           NM                                                                 SC                      college
                     65-85                   AK                                                                                                               MS                GA
                                                                                                                                                                       AL                                      votes
                                                                                                                                    TX
                     Very                                                                                                                               LA                                                         55
                                                                                                                                                                                                                   25
                     likely                                                       HI
                                                                                                                                                                                     FL                            10
                     85-99

                     Safe
                     99+
                                                                                                                                                                                                       270 votes
                                                                                                                                                                                                          to win
  Donald Trump                                           Biden sure                              Biden very likely                                 Biden likely                              Uncertain

Source: The Economist, Deutsche Bank AG. Data as of August 4, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   30
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Is the election already over?
Not by a long shot – four months will feel like four years. The issues will be big
and emotional and the polls are likely to bounce around week after week.

                                  Major Trump                                                                                                           Major Biden
                                  Campaign Themes                                                                                                       Campaign Themes

 •       Recovery of the economy                                                                                       •       Recovery of the economy
 •       China challenge – “I’m tougher”                                                                               •       Social justice and equality
 •       Trade                                                                                                         •       Healthcare
 •       Crime/Drug Problem                                                                                            •       China challenge – “I’m tougher”
 •       Taxes                                                                                                         •       Trade
 •       Infrastructure                                                                                                •       Infrastructure – Green New Deal 2.0
                                                                                                                       •       Environment/climate change/ESG

Source: Deutsche Bank AG. Data as of July 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   31
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Biden’s policies as we know them now

   Tax Policy:                                                                                                  Foreign, Defense, and Trade Policy:

   •        Corporate taxes increase to 28%+                                                                    •         EU and NATO reconciliation – to some degree.
   •        High-net worth clients will see tax increases                                                       •         China will continue to dominate as the
            – expect serious debate on wealth tax and                                                                     foreign/defense/trade policy issue. What will change
            asset tax                                                                                                     will be:
   •        Carbon tax                                                                                                       o     U.S. likely to join TPP – the NATO of the Indo-
   •        But until the economy is fully back on its                                                                             Pacific?
            feet, not much can much more be done?                                                                            o     U.S. focusing on Chinese human rights abuses
                                                                                                                •         Latin America will come in for renewed focus,
   Healthcare:                                                                                                            especially Venezuela and Brazil
   •        Biden is campaigning on bolstering                                                                  •         Iran will continue to dominate Mid-East policy. Any
            Obamacare, not Medicare for all.                                                                              chance for new negotiations over the JCPOA?
   •        Significant new funding for health crisis                                                           •         Russia will face tougher relationship
            planning.                                                                                           •         The Arctic will become a major foreign policy and
                                                                                                                          environment flashpoint between the U.S., China and
                                                                                                                          Russia.
   Environment:
   •        Signing on to the Paris Climate Accord
   •        Return plus to Obama regulatory policies
   •        Infrastructure - Green New Deal 2.0

Footnotes: TPP stands for Trans-Pacific Partnership. JCPOA stands for the Joint Comprehensive Plan of Action, commonly known as the Iran nuclear deal.
Source: Deutsche Bank AG. Data as of July 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   32
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Impact on economy and markets
Summary

                Growth disparities                                                   Fixed income and equity                                                        FX and commodities
  Global recession, stabilization                                                   Low growth & monetary                                                   Stable USD expected, status
  end 2020, recovery expected in                                                  stimulus to keep yields low                                                as a safe-haven currency
              2021                                                                                                                                                  during crisis
                                                                                    Focus on more defensive
  China ahead in terms of growth                                                    investment-grade bonds                                                   Weaker CNY through trade
         rebound in 2020                                                                                                                                             tensions
                                                                             Moderate upside potential after
 U.S. and Europe increased debt                                                 recovery of last months                                                  Gold prices to be supported by
      levels to counter crisis                                                                                                                           low rates and demand for safe
                                                                                  Valuations remain elevated
     LatAm limited fiscal capacity                                                                                                                                haven assets
                                                                                    Focus: IT and Healthcare

Source: Deutsche Bank AG.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   33
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
01                                                                                        02

     The idea                                                                                  Impact on
     of kairos                                                                                 economy & markets

    03

   Future of                                                                                   04

                                                                                               ESG and
                                                                                                                                                                                  05

                                                                                                                                                                                  Policy
   work & trade                                                                                conservation                                                                       implications
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   34
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Where will productivity go from here?

    Productivity vs. average hourly earnings of production

    2100
                                                                                                                                            Productivity and technological changes
    1900
                                                                                                                                            Based on past recessions, labor productivity is
    1700                                                                                                                                    likely to rebound cyclically as the global
    1500                                                                                                                                    economy recovers, but is likely to remain below
                                                                                                                                            the pre-pandemic level.
    1300
                                                                                                                                            The rise in remote working due to COVID-19
    1100
                                                                                                                                            led to a rise in working hours but not necessarily
      900                                                                                                                                   productivity.

      700                                                                                                                                   Organizational and technological changes to
                                                                                                                                            the way businesses operate are here to stay.
      500
                                                                                                                                            Productivity dampening effects may appear if
      300                                                                                                                                   they erode capital or disrupt the accumulation
                                                                                                                                            of physical or human capital. Productivity
      100                                                                                                                                   enhancing effects are also possible by
            1964 1970 1976 1982 1988 1994 2001 2007 2013 2019                                                                               eliminating the least efficient firms and
                                                                                                                                            encouraging the adoption of efficient
                    Productivity                                                                                                            production technologies. Acquiring the required
                                                                                                                                            skills to complement new technologies will be
                    Average Hourly Earnings of Production and Nonsupervisory
                                                                                                                                            key.
                    Employees

Source: Federal Reserve Bank of St. Louis, The Economist, World Bank, Deutsche Bank AG. Data as of May 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   35
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Labour market responses

                                      Perspectives from Europe
                                      •   Strongest economic downturn expected as large amount of SMEs cause higher risk of
                                          default
                                      •   EU response: Support through the European Social Fund, new financial instrument: Loans
                                          up to €100bn, underpinned by system of voluntary guarantees

                                     Perspectives from the U.S.
                                     •   Job loss concentrated among low-wage workers and women, with a modest rebound in May
                                     •   U.S. response: relief for individuals and businesses, unemployed workers get additional 13
                                         weeks of benefits and receive an extra $600 a week for up to six months

                                      Perspectives from Asia
                                      • Large percentage of informal workers with no access to sick leave or unemployment benefits
                                      • Policy responses include the expansion of social assistance and other programmes, new
                                        transfers regulations, public work programmes, employment retention

Sources: Deutsche Bank AG, IMFBlog, Doer et al. Data as of July 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   36
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Future of work

                                                                                            • Extended employment of contingent vs. full-time
                                                                                              employees to achieve more flexibility

                                                                                            • Higher focus on resilience rather than efficiency

                                                                                            • Increase in organizational complexity due to post-
                                                                                              COVID-19 M&A

                                                                                            • Rise in the use of cloud services

                                                                                            • Heightened importance of cybersecurity

Sources: Deutsche Bank AG, Deloitte. Data as of 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   37
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
What is to change structurally?
     •      Economically more developed countries have higher
            abilities to offer work from home
     •      Wage employment percentage vs. self-employed as
            decisive factor
     •      Salaried employees home office hours per week
            increased by more than 21% with expectation to
            remain elevated

     Pros of Working From Home:
     •   Employees stated to be happier, more productive
         and less likely to quit
     •   Time and money saving effects

     Cons of Working From Home:
     •  Potential motivational problems
     •  Promotions become less likely
     •  Isolation might affect mental health

Sources: Gottlieb et al. 2020, Bloom et al. 2015, Von Gaudecker et al. 2020, Deutsche Bank AG.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   38
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Rise of “stakeholder capitalism”
     Answers of CEOs of Fortune 500 companies

    What are your top concerns with respect to business risk management in today’s current environment?*

     70
     60
     50
     40
     30
     20
     10
        0
                   Keeping my                Providing additional                Short term               Dependencies on                  Supply-chain                  Impact on my                   Economic
                 employees safe                  benefits and                     liquidity                federal, state,                  continuity                  costumers and                 forecasts and
                 and productively                flexible work                                               and local                                                 uncertainty with              uncertainty with
                    employed                    arrangements                                               governments                                                  their business               demand for my
                                                                                                                                                                          continuity or               products and
                                                                                                                                                                          vulnerability                  services

                    My number one concern                        One of my top three concerns                          A concern, but not among my top three                                Not a major concern

*Risk question provided by survey sponsor, Zurich North America Insurance.
Footnotes: A similar survey question was “Regarding moving toward stakeholder capitalism, I believe the pandemic will”: Accelerate the move (48.2%), Slow the move (18.1%),
Have no effect (31.3%), Other (2.4%). Corporate behavioral changes include the increasing interest of corporations to serve the interests of all their stakeholders. This includes
factors such as more attention to healthcare needs, community and employee investment priorities. Source: Fortune 500 survey. Data as of June 2020.

In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   39
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Consumer behavior shifts

    U.S. consumer spending changes by different categories

     400%

     300%

     200%

     100%

         0%

    -100%

    -200%
                       Grocery             Pharmacy                 Apparel          Casual Dining Fast Food Food Delivery                                   Grocery                 Airline                Hotel
                                                                                                                                                             Delivery

                                                Feb 25, 2020 YoY Spending                              May 5, 2020 YoY Spending                              Overall Change

Source: The Visual Capitalist, Deutsche Bank AG, Data as of May 12, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   40
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Adoption of digital sales channels rises

    % of respondents satisfied with digital adoption in the U.S.

                                           73%                                                                                                            Human behavioral changes

                                                                                                                                                          •       More rapid technology adoption
                                                                    61%                                                                                   •       Increased consumer caution
                                                                                                                                                          •       Virtual work experiences and
               51%                                                                                                                                                communication
                                                                                                                                                          •       Remote learning
                                          51%
                                                                                                45%                                                       •       Contact tracing and surveillance
                                                                      30%                                                     37%                         •       Privacy tradeoffs for health
                                                                                                                                                                  security
                                                                                                                                                          •       Evolving and new employer-
              33%                                                                                                                                                 employee social contracts
                                                                                                  31%
                                                                                                                              37%
                                                                      31%
              17%                         21%
                                                                                                  13%
                                                                                                                               6%
            Average                                              Grocery                     Apparel                         Travel
                                       Banking
        (all industries)

           Regular users                    First time users

Source: McKinsey & Company, Deutsche Bank AG. Data as of May, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   41
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Accelerating digital
                                                                                           transformation
                                                                                           The current crisis is accelerating pre-existing
                                                                                           technology trends

                                                                                           • Evolving technology channels
                                                                                             for customer engagement

                                                                                           • Digital processes, automation and AI as
                                                                                             productivity drivers

                                                                                           • Data driven strategy and decision-making

                                                                                           • Lighter physical space footprints

                                                                                           • 5G as a robust technology solution

                                                                                           • Medical technology on the forefront

Source: Deutsche Bank AG. Data as of May 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   42
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Central bank digital currencies (I)
     What is it?                                                                    Why?                                                                           How?
  • Digital currency issued by the                                                • Financial inclusion
                                                                                                                                                               • Wholesale purpose (token-based)
    central bank                                                                  • Increased efficiency and speed
                                                                                                                                                                    •    Limited access to banks and
  • Alternative to traditional fiat-                                              • Enhanced security                                                                    financial institutions
    currencies
                                                                                  • Disintermediation – major                                                  • General purpose (account-based)
  • >80% of central banks are                                                       challenges for banking system
    exploring the issuance of CBDC                                                                                                                                  •    Individual accounts are held at
                                                                                  • Exploring new levels of negative                                                     the central bank
  • Sweden & China most advanced                                                    interest rates
    countries, running pilot projects                                                                                                                          • General purpose (token-based)
                                                                                  • Better trace ability
                                                                                                                                                                    •    Allowing cash-like transactions
                                                                                  • Easier monetary policy transmission

                 Operational Risks                                                          Strategy & Policy Risks                                                             Financial Risks

    • Fraud                                                                         • Payment systems                                                           • Liquidity
    • Legal                                                                         • Financial and price stability                                             • Financial market implications
    • IT infrastructure                                                             • Economic growth                                                           • Credit/Lending

                                                                                              Reputational Risks

Source: Deutsche Bank AG, Deutsche Bank Investment Strategy Group. Data as of July 24, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   43
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Central bank digital currencies (II)

                                     Token-based CBDC                                                                                                          Account-based CBDC

                                                                 Traditional central bank money                                                                              CBDC

                                                                                                  Reserves and
                                                               Cash                                                                               Token-based                               Account-based
                                                                                               settlement balances

   Permanent availability                                         ✓                                           X                                            ✓                                           ✓

   Anonymity                                                      ✓                                           X                                            ✓                                           X

   Peer-to-peer transfer                                          ✓                                           X                                            ✓                                           X

   Interest-bearing                                               X                                           ✓                                            ✓                                           ✓
   Limits or caps                                                 X                                            X                                           ✓                                           ✓

Source: Deutsche Bank AG, Deutsche Bank Investment Strategy Group. Data as of July 24, 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   44
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Technology developments with
disrupted trade flows
                                     Perspectives from Europe
                                     •       Operational resilience as core topic with increasing dependency on non-EU tech providers
                                     •       Increasing desire for regional solutions
                                     •       Uptake of contactless payment pressures investments in tech infrastructure (5G)
                                     •       Digital solutions depend on pending on EU’s digital legislation

                                     Perspectives from the U.S.
                                     •       Protectionist measures taken against slow production and tech-components limitation
                                     •       Focus on "Make America Great Again", produce, buy and consume U.S. products
                                     •       Bring supply chains closer to home

                                     Perspectives from Asia
                                     •       Lockdown underlines need for access to technological infrastructure in India
                                     •       China: integration of artificial intelligence and big data with health code systems (app to self-
                                             monitor health status and prove it to others) that evolve into smart social services
                                     •       China: focus on long term innovation strategy and emerging technologies – Made in China 2025
                                             and China Standards 2035

Source: Deutsche Bank AG. Data as of July 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   45
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
Is localization the new normal?
The current crisis has made trade links between Asian and American countries vulnerable to a reorganization of global value
chains. In 2019, the intracontinental trade weights accounted for almost 54% of global trade and transcontinental for 37% of
global trade (remaining 9% other). We see globalization remaining, albeit at a slower pace, and how it is done will be different
going forward. Rivalry for geopolitical leadership, pandemic-related issues, and the trade deal between U.S. and China will play
a role.

Intracontinental trade outweighs transcontinental trade
% of global trade, 2019

                                           Americas

            America to Asia                                                                                              Middle                                                                 Asia to America
                                                                                                                          East

                                                                                                          Africa

Source: Deutsche Bank Research, Deutsche Bank AG. Data as of June 2020.
In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved.   46
Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an
investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.
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