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What Lies Ahead: 2021 Economic Projections and the Year in Review

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What Lies Ahead? 2021 Global Economic Projections

View the high resolution version of this infographic. Buy the poster.

With over 1.4 million deaths worldwide, COVID-19 has impacted nearly every corner of society.

Yet, hope seems suddenly near. Crucial vaccine developments are emerging, with many of the 320 vaccines in advanced trials. Still, questions remain around the timing and effectiveness of the potential vaccine. With this in mind, the International Monetary Fund (IMF) projects that this year, global real GDP will fall –4.4%, bouncing back 5.2% in 2021.

As we look back on a historic year, this infographic from New York Life Investments traces the notable events of 2020, along with growth forecasts for the year ahead.

2020: Year in Review

From a deadly virus to U.S. elections, how did we get to where we are now?

Since COVID-19 was declared a pandemic, $12 trillion in global fiscal response helped stabilize the economy. Despite financial markets facing their sharpest drop in 30 years, the S&P 500 rebounded in record speed—recovering losses in under four months.

 S&P 500 Price Returns Global COVID-19 Cases
January-1%27
February-9%11,948
March-21%87,091
April-11%883,804
May-7%3.23M
June-5%6.15M
July0%10.48M
August7%17.63M
September3%25.57M
October0%34.09M
November11.7%*46.17M

Source: European CDC via Our World in Data
*As of November 27, 2020

In April, oil prices dropped into negative territory for the first time ever. The combination of both a demand shock and supply shock led oil futures to fall to -$37.63. Since then, oil prices recovered modestly, hovering close to $45 in November.

In another historic event, wildfires ravaged through the West Coast of the U.S., burning five million acres across Oregon, California, and Washington. Meanwhile, COVID-19 cases continued to climb. Global reported cases exceeded the 25 million mark by September.

Finally, on November 16, Moderna announced that its COVID-19 vaccine was 94.5% effective, just days after the 2020 president-elect, Joe Biden was announced.

Despite the number of record-breaking incidents over the year, the tech-dominated S&P 500 held steady. Here is how key economic figures have materialized against the backdrop of 2020:

1. Government Debt

Government debt rose 20% relative to GDP in advanced economies, while debt has grown at a slower pace in emerging market and low-income countries.

Gross Debt Position (% of GDP)20192020
Advanced economies105%125%
Emerging market and middle-income economies53%62%
Low-income developing countries43%49%

Source: IMF

2. Inflation

Overall, inflation was lower than pre-pandemic levels, sitting at around 1.5%.

While commodities and medical supplies saw their prices rise, weak global demand for overall goods cancelled out these inflationary effects.

3. Sector Performance

Service sectors were hit among the hardest as social distancing measures were enacted to stave off the pandemic.

In the first half of 2020, accommodation, arts, and entertainment sectors fell close to 15% compared to 2019. Meanwhile, banks were cushioned with cash reserves in the event of unexpected risks, breaking roughly even in year-over-year growth.

While the economy has encountered numerous challenges, the IMF expresses cautious optimism for the year ahead.

2021: Global Growth Outlook

Since the IMF’s June projections, economic growth forecasts have somewhat improved. Primarily, optimism is being driven from Q2 GDP growth that exceeded expectations.

Global Growth ForecastsApril JuneOctober
2020-3.0%-4.9%-4.4%
20215.8%5.4%5.2%

Source: IMF

By contrast, pre-pandemic projections for 2020 and 2021 were 3.3% and 3.4%, respectively.

Over 2020, China enacted several strict measures to contain COVID-19 early in the outbreak, a key factor behind its economic momentum. Meanwhile, India is projected to rebound 8.8%—higher than any other country in 2021, according to IMF-reported countries.

While several factors remain uncertain, what will pave the way for a global recovery?

Analysis of a Successful Global Recovery

Growth projections are improving, but economic success will hinge on these three layers.

 3 Layers for Economic Success 
1The path of COVID-19Public health measures & the race for a vaccine

Impact on domestic economic activity
2Global consumer demandTourism activity

Remittance flows
3Financial market sentiment and capital flowsSupply disruptions

Policy effectiveness

To prevent further unwanted outcomes, it will be essential that policy support is not withdrawn too soon.

The Road to Recovery

With these factors in mind, how could global conditions transform in the months ahead?

Best Case ScenarioWorst Case Scenario
Accelerating global demand

Maintaining liquidity for countries in need

International cooperation

Fair and equal vaccine
implementation across countries
Weakened economic activity

Tightening lending conditions for countries in need

Protectionist measures

Country-level vaccine disparities

In the face of these obstacles, the health of the global economy rests on sufficient consumer demand, capital flows and COVID-19 containment. With news of vaccine developments underway, the outlook is appearing a bit brighter.

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Infographics

The Top 6 Infrastructure Investment Opportunities

Based on funding from the Infrastructure Investment and Jobs Act, this graphic explores the top 6 infrastructure investment opportunities.

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Infrastructure Investment

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The Top 6 Infrastructure Investment Opportunities

The U.S. government is putting a focus on infrastructure investment. For years, the country’s infrastructure—critical structures and facilities like roads, power supplies, and internet access—has been in poor condition.

Now, the government is pledging billions of dollars in funding. In this graphic from New York Life Investments, we explore how this public commitment translates into six potential infrastructure investment opportunities.

Breaking Down the Infrastructure Investment and Jobs Act

The Infrastructure Investment and Jobs Act was signed into law in November 2021. It includes nearly $550 billion in new investments.

CategoryInvestment Amount
Transportation$283.8B
Broadband$65.0B
Energy & Power$65.0B
Water$63.3B
Climate & Cybersecurity Resiliency$47.2B
Environmental Remediation$21.0B

Based on these commitments, here are the six categories that present potential infrastructure investment opportunities.

1. Transportation

52.0% of new government funding

Because infrastructure has been underfunded for some time, transportation systems are in a state of disrepair.

  • 43% of roads are in poor or mediocre condition
  • 231,000 of the country’s 617,000 bridges are in need of repair or preservation work

New government funding will enable the expansion and repair of transportation infrastructure.

The infrastructure investment opportunity: Funding could increase revenue and provide stable long-term contracts to engineering, materials, and construction companies.

2. Broadband

11.9% of new government funding

Millions of Americans don’t have access to broadband (high speed) internet, and the number of people who don’t use it is even higher due to affordability issues.

  • People without access: 14.5 million
  • People who don’t use broadband: 120.4 million

New government funding will increase access and help reduce prices.

The infrastructure investment opportunity: Funding could boost the customer base and revenue of internet service providers.

3. Energy & Power

11.9% of new government funding

The U.S. has set a goal to have net zero emissions by 2050, yet the country gets most of its energy with fossil fuels.

SourcePercent of U.S. Energy Consumption in 2020
Petroleum34.7%
Natural Gas 34.0%
Renewables12.5%
Coal9.9%
Nuclear8.9%

New government funding will help build electric power transmission lines and facilitate clean energy technology.

The infrastructure investment opportunity: Funding could boost the revenue of utility, manufacturing, and renewable energy companies.

4. Water

11.6% of new government funding

U.S. water infrastructure is aging, with 14-18% of potable water lost through leaks. The annual costs of wasting this treated water is projected to increase from $7.6 billion in 2019 to $16.7 billion in 2039.

New government funding will modernize water infrastructure, invest in water storage and recycling, and remove lead pipes.

The infrastructure investment opportunity: Funding could boost the revenue of engineering firms and companies that build, install, and repair water pipes.

5. Climate & Cybersecurity Resiliency

8.7% of new government funding

Climate disasters and cyber attacks are leading to increased costs & destruction of infrastructure. In 2020, there were 22 U.S. climate disasters that each cost over $1 billion in damage—with a total cost of $100 billion.

Type of DisasterCost in 2020
Tropical Cyclone$57.5B
Severe Storm$35.5B
Wildfire$17.3B
Drought$4.7B

New government funding will invest in protection against cyber attacks, floods, droughts, and other climate disasters.

The infrastructure investment opportunity: Funding could boost the revenue of companies involved in cybersecurity, weatherization, environmental consultation, and construction.

6. Environmental Remediation

3.9% of new government funding

Contaminated sites are causing environmental harm or hindering land reuse, and there are more than 450,000 of them across the country. New government funding will clean up contaminated land, reclaim abandoned land mines, and plug orphaned oil and gas wells.

The infrastructure investment opportunity: Funding could boost the revenue and long-term contracts of environmental remediation companies.

Public Funding, Private Infrastructure Investment Opportunities

A boost in government funding is likely to create increased activity in private infrastructure-related areas:

  • Engineering
  • Construction
  • Materials
  • Internet Service Providers
  • Clean Energy Tech
  • Pipe Installation
  • Cybersecurity
  • Environmental Consultation

By paying attention to where the money is going, investors can consider a variety of categories that provide critical services—and capitalize on upcoming trends.

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Infographics

What Retirement Barriers do Americans Face Today?

Retirement barriers are making it difficult for people to feel good about their future. See how advisors can help in this infographic.

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What Retirement Barriers do Americans Face Today?

Today’s definition of retirement is much different than before.

It’s no longer a postscript to career, but instead a time to enjoy freedom. This could be the freedom to learn new hobbies, the freedom to travel, or the freedom to start an online business. Unfortunately, this freedom is proving to be difficult to achieve for most.

In this infographic from New York Life Investments, we discuss the retirement gap—what it is, why it exists, and how advisors can help reduce it.

What is the Retirement Gap?

New York Life Investments partnered with AARP to survey over 3,000 Americans about their retirement plans. They uncovered that across all ages, there was a gap between i) people’s perceived importance of retirement planning, and ii) their actual preparedness.

Age groupPerceived importance of preparing for retirementActual preparedness
20s77%45%
30s87%41%
40s87%40%
50s92%47%
60s93%58%
70-7484%70%

Based on a survey of 3,025 Americans aged 20-74.

These results suggest that the status quo around retirement planning isn’t working for most people. This is further supported by other survey findings. For example, 65% of respondents said they didn’t feel optimistic about retirement.

What Barriers do Americans Face?

The survey determined that Americans are struggling to overcome five retirement barriers. Let’s hear from survey respondents to learn more about them.

#1: Managing multiple priorities

Juggling between retirement savings and more immediate needs such as childcare can lead to emotional overwhelm.

”It’s difficult to put substantial money in a 401 or IRA while also paying off debt at the same time.”
– Alex B. (20s)

#2: Figuring out how much is enough

Uncertainty about how much savings is needed causes many people to avoid retirement planning altogether. The problem can simply feel too large to tackle.

”Retirement and aging are not things I look forward to, mainly because of the lack of preparation and fear of the unknown.”– Janet F. (50s)

#3: The complexity of resources

Many Americans find retirement resources are too difficult to understand. This issue is related to a lack of financial literacy, which happens to be a growing problem in the United States.

”They don’t break it down into where you can understand it.”– Amy E. (40s)

#4: Lack of representation in the marketplace

People feel that available resources are not speaking to them, or are not relevant to their life circumstances. This type of “alienation” can discourage people from seeking professional advice.

”I don’t see people who are anything like me. I see representations of upper management people…and I know that won’t be my reality.– Penni B. (60s)

#5: Don’t know who to trust

People feel that the financial industry does not have their best interests in mind. They often seek information from sources who seem more like “them.”

”I avoid professionals because I hear so many stories of financial planners who cheated people in their investments. I believe in some of the people I follow on YouTube more.”– Dino M. (50s)

Bridging the Gap

Altogether, these barriers highlight a disconnect between who the market is targeting, and who is most in need of help. Financially advisors have the power to bridge this gap by doing two things.

The first is to view investors as “customers for life”. Large firms often push advisors to work with clients who have a greater level of assets—typically those in their 40s or older. This could create a major challenge for younger generations who hope to one day retire.

For example, survey data shows that people’s expected retirement age increases as they grow older. This suggests that young adults are struggling to develop the right financial plan for their needs.

Age of respondentExpected retirement age
20s55.7
30s60.7
40s64.6
50s64.9
60s67.8

Based on a survey of 3,025 Americans aged 20-74.

By viewing investors as “customers for life”, advisors have the opportunity to steer people onto the right path at an earlier age. This can help them create positive impact in their communities, as well as grow their business through word-of-mouth marketing.

The second thing advisors can do is reach out to underserved communities. Data shows that Black and Hispanic Americans are less likely to have retirement savings, while those that do feel much less confident.

EthnicityHave retirement savingsPerceive retirement savings as being on track
White80%42%
Black63%23%
Hispanic58%22%
Asian85%47%

Source: Statista (2021)

Up to this point we’ve focused on the financial aspect of retirement, but what about health & wellness?

Redefining Retirement: Health, Wealth, and Self

The rising importance of personal health has been a major phenomenon of the COVID-19 pandemic. According to McKinsey, 48% of Americans increased their prioritization of wellness compared to 2-3 years ago.

This shift in thinking must also be reflected by retirement plans. One way to do this is to integrate health & wellness considerations alongside wealth.

For example, poor physical health can significantly drive up the costs of retirement. In fact, the average American aged 65-84 already spends nearly $17,000 per year on healthcare.

Mental health, on the other hand, can be severely affected by money-related stress. Symptoms include a loss of sleep, high blood pressure, and a negative impact on personal relationships.

Perhaps most interesting is that the relationship between health and wealth goes both ways. In other words, wealth can be a driver of better emotional and physical health. The following table shows how individuals with greater income felt better about their wellbeing.

Income levelConsider themselves to be emotionally healthyPhysically healthy
Under $40K50%47%
$40K - $75K63%56%
$75K - $100K68%63%
Over $100K73%68%

Based on a survey of 3,025 Americans aged 20-74.

To develop a more holistic retirement plan for their clients, advisors must transform from financially focused representatives to holistic life coaches.

Barriers are Meant to be Broken

With the concept of retirement, many Americans feel like they are on the outside looking in. They suffer from a lack of representation, a mistrust for the financial industry, and have few resources that are catered to them.

What’s needed is a democratization of retirement planning.

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