This research was published on August 14, 2020 in Harvard Business Review

Six months after the start of the coronavirus recession the macroeconomic landscape has become more, not less, confusing. Business leaders have to navigate shattered expectations, widely disparate outcomes, and continued uncertainty. Although we have seen the worst growth decline on record, financial markets are buoyant. It’s time to take a step back and reflect on the journey so far.

What Was Expected — and What Happened

As the crisis unfolded in February and March of this year, business leaders were forced to rapidly shift their expectations for the future. While expectations varied, we identified five disparities between common assumptions at the time and our current realities.

1. Intensity was underestimated.

Economic forecasts gyrated wildly at the start of the crisis. For example, the median broker forecast for 2Q U.S. growth was still around 0% in mid-March, before collapsing 30 percentage points over the next 20 days. Over the following months the forecast settled around -35% (annualized – not to be confused with, but equivalent to, -10% quarter on quarter growth). That figure turned out to be closer to the truth (actual growth was -33% annualized, or -9.5% q/q) but the spread around the median forecast remained extremely large. Regardless of future revisions, a historically bad growth decline is now a fact and the episode highlights the limits of modeling outside of the known empirical range.