What is a K Shaped Economic Recovery

Published / Last Updated on 04/11/2020

For most people, we are used to the traditional ‘V’ shaped recovery where economic activity and markets are high, then they plunge into recession and then they recover as part of a normal economic cycle.

Sometimes, there is a “W” shaped recovery, markets highs, then some stimulus to bounce back up a little then another fall back before final recovery.

A ‘K’ recovery occurs where that has been major structural change to business, activities or technologies used.  Certainly the Industrial Revolution in the 19th century saw this e.g. with traditional farming, travel and production changed with new ‘industrial’ steam engines and trains, machines to make textiles and industrial farming tools rather than human labour or animal power even the canals became wasteland.  We also saw it in the technology revolution.  There were winners and losers as we moved to using tech more even shopping patterns and our high streets have changed.

‘K’ shaped recoveries are where both many existing sectors and new sectors thrive and other sectors fall away – the upwards and downwards strokes in the letter K.    ESG (environmental, social responsible and governance) investing is going to grow exponentially.  Other sectors will struggle to recover, indeed if they ever do.

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