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Animated Map: An Economic Forecast for the COVID-19 Recovery (2020-21)

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Animation: An Economic Forecast for the COVID-19 Recovery (2020-21)

Economic Forecast

This Markets in a Minute Chart is available as a poster.

COVID-19 Recovery: A Global Economic Forecast

As governments enact COVID-19 containment measures, economies around the world have slowed to a crawl. Many people find themselves out of work, and businesses are struggling to stay afloat amid strict regulations and plummeting demand.

However, while current economic conditions are bleak, some forecasts for the upcoming recovery provide room for investor optimism. According to the most recent forecast from the International Monetary Fund (IMF), it’s projected that the global economy will contract by 3% in 2020, followed by 5.8% growth in 2021.

In today’s Markets in a Minute from New York Life Investments, we take a look at the country-level economic forecast to highlight which areas may recover the fastest.

Emerging from The Great Lockdown

Given the numerous uncertainties COVID-19 brings, preparing an economic forecast was no easy task. The IMF’s most recent projections assume that the pandemic fades in the second half of 2020, containment efforts are gradually unwound, and governments provide policy support.

With this in mind, which countries are expected to see the strongest recoveries? Below is the full country-level forecast, sorted by projected real GDP growth in 2021.

Real GDP, Annual Percentage Change
2019 Actual, 2020-2021 Projected

Jurisdiction20192020P2021P
Libya9.9–58.780.7
Macao SAR–4.7–29.632.0
Palau0.5–11.914.4
Maldives5.7–8.113.2
Aruba0.4–13.712.1
Bangladesh7.92.09.5
China6.11.29.2
Malaysia4.3–1.79.0
Côte d'Ivoire6.92.78.7
St. Kitts and Nevis2.9–8.18.5
Djibouti7.51.08.5
Latvia2.2–8.68.3
Lithuania3.9–8.18.2
Indonesia5.00.58.2
Niger5.81.08.1
Mongolia5.1–1.08.0
Albania2.2–5.08.0
Antigua and Barbuda5.3–10.08.0
Kyrgyz Republic4.5–4.08.0
Seychelles3.9–10.88.0
Estonia4.3–7.57.9
Philippines5.90.67.6
Belize0.3–12.07.6
Guinea5.62.97.6
Czech Republic2.6–6.57.5
Myanmar6.51.87.5
Kosovo4.0–5.07.5
Serbia4.2–3.07.5
India4.21.97.4
Iraq3.9–4.77.2
Barbados–0.1–7.67.1
Malta4.4–2.87.0
Fiji0.5–5.87.0
Vietnam7.02.77.0
North Macedonia3.6–4.07.0
Uzbekistan5.61.87.0
St. Lucia1.7–8.56.9
Botswana3.0–5.46.8
The Bahamas1.8–8.36.7
Rwanda10.13.56.7
Montenegro3.6–9.06.5
The Gambia6.02.56.5
Turkmenistan6.31.86.4
Ireland5.5–6.86.3
Guyana4.752.86.3
Algeria0.7–5.26.2
Australia1.8–6.76.1
Cambodia7.0–1.66.1
Thailand2.4–6.76.1
Grenada3.1–8.06.1
Yemen2.1–3.06.1
Chad3.0–0.26.1
Kenya5.61.06.1
Denmark2.4–6.56.0
Iceland1.9–7.26.0
Bulgaria3.4–4.06.0
Benin6.44.56.0
New Zealand2.2–7.25.9
Eritrea3.80.15.9
Ghana6.11.55.9
Mauritius3.5–6.85.9
Burkina Faso5.72.05.8
Cyprus3.2–6.55.6
Lao P.D.R.4.70.75.6
Guatemala3.6–2.05.5
Tajikistan7.51.05.5
Cabo Verde5.5–4.05.5
São Tomé and Príncipe1.3–6.05.5
Senegal5.33.05.5
Slovenia2.4–8.05.4
San Marino1.1–12.25.4
St. Vincent and the Grenadines0.4–4.55.4
Chile1.1–4.55.3
Germany0.6–7.05.2
Sweden1.2–6.85.2
Peru2.2–4.55.2
Greece1.9–10.05.1
Lesotho1.2–5.25.1
Portugal2.2–8.05.0
Slovak Republic2.3–6.25.0
Israel3.5–6.35.0
Nepal7.12.55.0
Turkey0.9–5.05.0
Uruguay0.2–3.05.0
Qatar0.1–4.35.0
Madagascar4.80.45.0
Vanuatu2.9–3.34.9
Croatia2.9–9.04.9
Suriname2.3–4.94.9
Italy0.3–9.14.8
Luxembourg2.3–4.94.8
Armenia7.6–1.54.8
Morocco2.2–3.74.8
United States2.3–5.94.7
Mozambique2.22.24.7
Belgium1.4–6.94.6
Tanzania6.32.04.6
France1.3–7.24.5
Austria1.6–7.04.5
El Salvador2.4–5.44.5
Afghanistan3.0–3.04.5
Argentina–2.2–5.74.4
Spain2.0–8.04.3
Ethiopia9.03.24.3
Uganda4.93.54.3
Canada1.6–6.24.2
Sri Lanka2.3–0.54.2
Hungary4.9–3.14.2
Poland4.1–4.64.2
Mauritania5.9–2.04.2
Burundi1.8–5.54.2
Moldova3.6–3.04.1
Honduras2.7–2.44.1
Kazakhstan4.5–2.54.1
Tunisia1.0–4.34.1
Cameroon3.7–1.24.1
Mali5.11.54.1
United Kingdom1.4–6.54.0
Dominican Republic5.1–1.04.0
Panama3.0–2.04.0
Paraguay0.2–1.04.0
Central African Republic3.01.04.0
Liberia–2.5–2.54.0
Sierra Leone5.1–2.34.0
South Africa0.2–5.84.0
Togo5.31.04.0
Hong Kong SAR–1.2–4.83.9
Romania4.1–5.03.9
Ecuador0.1–6.33.9
Switzerland0.9–6.03.8
Solomon Islands1.2–2.13.8
Timor-Leste3.1–3.03.8
Colombia3.3–2.43.7
Jordan2.0–3.73.7
Ukraine3.2–7.73.6
Gabon3.4–1.23.6
Taiwan Province of China2.7–4.03.5
Brunei Darussalam3.91.33.5
Tuvalu6.0–1.03.5
Belarus1.2–6.03.5
Bosnia and Herzegovina2.7–5.03.5
Russia1.3–5.53.5
Jamaica1.0–5.63.5
Democratic Republic of the Congo4.4–2.23.5
Korea2.0–1.23.4
Dominica9.2–4.73.4
Kuwait0.7–1.13.4
Republic of Congo–0.9–2.33.4
United Arab Emirates1.3–3.53.3
Marshall Islands2.4–0.23.2
Namibia–1.4–2.53.2
South Sudan11.34.93.2
Finland1.0–6.03.1
Iran–7.6–6.03.1
Comoros1.9–1.23.1
Netherlands1.8–7.53.0
Japan0.7–5.23.0
Singapore0.7–3.53.0
Costa Rica2.1–3.33.0
Mexico–0.1–6.63.0
Bahrain1.8–3.63.0
Georgia5.1–4.03.0
Oman0.5–2.83.0
Guinea-Bissau4.6–1.53.0
Norway1.2–6.32.9
Bhutan5.32.72.9
Papua New Guinea5.0–1.02.9
Bolivia2.8–2.92.9
Brazil1.1–5.32.9
Saudi Arabia0.3–2.32.9
Somalia2.9–2.52.9
Egypt5.62.02.8
Trinidad and Tobago–0.0–4.52.6
Angola–1.5–1.42.6
Malawi4.51.02.5
Zimbabwe–8.3–7.42.5
Nigeria2.2–3.42.4
Equatorial Guinea–6.1–5.52.3
Zambia1.5–3.52.3
Kiribati2.30.02.2
Pakistan3.3–1.52.0
Eswatini1.0–0.91.8
Puerto Rico2.0–6.01.5
Micronesia1.2–0.41.4
Nauru1.0–1.71.3
Tonga–0.1–1.21.2
Haiti–1.2–4.01.2
Azerbaijan2.3–2.20.7
Samoa3.5–3.70.5
Nicaragua–3.9–6.00.0
Sudan–2.5–7.2–3.0
Venezuela–35.0–15.0–5.0
Lebanon–6.5–12.0No data
SyriaNo dataNo dataNo data

Libya is forecast to have the highest growth in 2021, as well as the deepest contraction in 2020. However, the IMF notes the reliability of this data is low given Libya is currently facing a civil war and weak capacity.

Emerging and developing Asia is expected to have a strong recovery, with China and India predicted to see 2021 growth rates of 9.2% and 7.4% respectively. For China, this is a welcome change after its first quarter GDP contracted by 6.8%, the first decline since at least 1992.

The IMF predicts the U.S. will see GDP growth of 4.7% in 2021, which is slightly higher than the 4.5% average for advanced economies. Separately, the U.S. Federal Reserve also believes the economy will recover relatively quickly given the country entered the pandemic on strong economic footing.

There is every reason to believe that the economic rebound, when it comes, can be robust.

Jerome Powell, U.S. Federal Reserve Chairman

In the meantime, the Federal Reserve says it is committed to providing financing programs and maintaining low interest rates to help boost the economy.

Spotting Opportunity

As the pandemic subsides, broad-based stimulus will be critical for economic recoveries. Clear communication on the state of the pandemic, and the decline of new infections, will also help instill consumer confidence.

Investors can consider these factors, as well as the IMF’s forecast, as they look to diversify geographically. This allows investors to take advantage of areas with the highest potential growth.

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Markets in a Minute

Explainer: A Visual Introduction to Fed Tapering

Broadly speaking, Fed tapering is the reversal of quantitative easing. We show the history of Federal Reserve bond tapering and how it works.

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Fed Tapering

Explainer: A Visual Introduction to Fed Tapering

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The Federal Reserve began tapering its large-scale asset purchases in November 2021, a move likely influenced by:

  • Rising inflation
  • Improving unemployment
  • Strong U.S. GDP growth

More than $4 trillion in capital was injected into the economy through quantitative easing (QE), over the course of the pandemic, inflation is at 40-year highs, and unemployment levels hover below 4%.

As Fed policy responds to a recovering U.S. economy, this Markets in a Minute chart from New York Life Investments shows how Fed tapering works, and its impact on the economy.

How Fed Tapering Works

Fed tapering is the unwinding of the Federal Reserve’s large-scale asset purchases.

After the 2008 financial crisis, large scale asset purchases were introduced for the first time to inject liquidity into the market and help restore confidence. During the pandemic, they were introduced once more, at a rate of $120 billion per month.

Here’s how it works:

  1. The U.S. central bank buys government bonds typically in the form of Treasuries and mortgage-backed securities (MBS).
  2. This influx of demand leads to a rise in these bond prices and their yields (interest rates) fall.
  3. As this lowers the interest rate on the government bonds, what often follows is lower interest rates on loans for households and businesses.
  4. Lower rates stimulate spending.
  5. When the economy is running well, the bank may unwind asset purchases to help keep inflation low, otherwise known as Fed tapering.
  6. Notably, Fed tapering and QE is hotly debated among economists. Those in favor say QE is a critical tool for stimulating the economy. Those against say that it inflates asset prices and contributes to inequality.

    Inflation Levels

    The consumer price index (CPI) rose 7% in December, the highest rise since 1982.
    Fed Tapering

    Given this increase, Lawrence Summers, former U.S. Treasury Secretary and Jason Furman, former chief economist for President Obama say that the Fed didn’t taper soon enough. Other financial heavyweights suggest this is just the beginning of a hawkish approach to inflation.

    So how does Fed tapering impact inflation?

    By tapering asset purchases, the amount of money circulating in the economy that can be used to borrow to buy a house or car is reduced. According to this theory, when there is less spending, inflation will gradually cool down.

    Fed Tapering and Interest Rates

    The Federal Reserve has outlined that it will taper asset purchases before it increases targets on short-term interest rates. By current estimates, interest rates could rise in March.

    However, if the pandemic takes a turn for the worse, the Federal Reserve can shift direction. This gives the Fed time to assess how the market and economy will react before it raises rates.

    To prevent the taper tantrum of 2013, which led to market volatility and U.S. dollar appreciation, Federal Reserve chair Jerome Powell has stated that the Fed must carefully communicate the sequence of QE and tapering to prevent any fear in the market.

    When Doves Cry

    Like the 1940s, the rise in money growth over the pandemic has been driven by government deficits. By contrast, leading up to the 2008 Global Financial Crisis or during the 1950s and 60s, the private sector spurred loan growth.

    Monetary inflation can impact consumer prices and financial asset inflation.

    As CPI and financial markets have soared over the pandemic, investors will be watching closely to see how Fed tapering impacts future monetary policy.

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Markets in a Minute

Ranked: Real Estate Returns by Property Sector (2012-2021)

From residential to retail, are there patterns in real estate return on investment? We rank them by sector over the last decade to find out.

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Real Estate Return on Investment by Sector

For the ninth year in a row, Americans say real estate is the best long-term investment.

However, what might be less clear to the average investor are the different types of investments available within the real estate sector, and how they compare. Real estate return on investment within property sectors has historically been uneven, and 2021 was no exception. While residential property soared, office real estate has performed relatively poorly.

Are there any patterns in the top performers over time?

This Markets in a Minute from New York Life Investments ranks real estate return on investment by sector over the last decade.

Sector Returns Over Time

We used data from the National Association of Real Estate Investment Trusts to show real estate return on investment by year. A real estate investment trust is a company that owns, operates, or finances income-producing real estate.

Here’s how total returns stack up by property sector, sorted from highest to lowest return in 2021.

 2012201320142015201620172018201920202021
Self Storage19.9%9.5%31.4%40.7%-8.1%3.7%2.9%13.7%12.9%57.6%
Residential6.9%-5.4%40.0%17.1%4.5%6.6%3.1%30.9%-10.7%45.8%
Industrial31.3%7.4%21.0%2.6%30.7%20.6%-2.5%48.7%12.2%45.4%
Retail26.7%1.9%27.6%4.6%1.0%-4.8%-5.0%10.7%-25.2%41.9%
Diversified12.2%4.3%27.2%-0.5%10.3%-0.1%-12.5%24.1%-21.8%20.5%
Infrastructure29.9%4.8%20.2%3.7%10.0%35.4%7.0%42.0%7.3%18.6%
Timber37.1%7.9%8.6%-7.0%8.3%21.9%-32.0%42.0%10.3%16.4%
Mortgage19.9%-2.0%17.9%-8.9%22.9%19.8%-2.5%21.3%-18.8%14.7%
Office14.2%5.6%25.9%0.3%13.2%5.3%-14.5%31.4%-18.4%13.4%
Healthcare20.4%-7.1%33.3%-7.3%6.4%0.9%7.6%21.2%-9.9%7.7%
Lodging/Resorts12.5%27.2%32.5%-24.4%24.3%7.2%-12.8%15.7%-23.6%6.3%

Data for 2021 is as of November 30. Specialty and data center sectors are excluded as this data was only available from 2015 onwards.

Self Storage real estate was the best performing sector for the last two years, and also performed well during the 2015 market correction. It tends to perform well when people’s lives are disrupted, such as when they’re moving for a new job, schooling, or due to marriage or divorce. In the case of COVID-19, self storage got an extra boost from people wanting more space in their home amid remote work.

Timber and Industrial real estate have been in the top three performing sectors for at least half of the last decade. Industrial real estate, a category including properties that enable the production, storage, and distribution of goods, has seen increased demand due to the rise of e-commerce. One estimate says the U.S. could require an extra billion square feet of warehouse space by 2025.

On the other hand, the Lodging/Resort sector has frequently been one of the bottom performers. A form of discretionary spending, hotel stays may be one of the first expenses people cut when the economy is in a downturn. This weakness was compounded by lockdown restrictions during the COVID-19 pandemic.

What is a Good Return on Investment in Real Estate?

In light of the above data, investors may be wondering which sectors are “the best” to invest in.

The short answer: it depends. Here’s how real estate return on investment has varied within sectors, using the minimum, median, and maximum returns. We’ve sorted the data from the highest to lowest standard deviation, a measure of risk.

Real Estate Return on Investment

While Timber and Self Storage have delivered strong returns, they have also been relatively risky, with some of the widest variations in returns.

Industrials have seen the highest median return, and their risk is about middle of the pack. The second highest median return goes to the Mortgage sector, which earns income from the interest on mortgages and mortgage-backed securities. The mortgage sector has seen less risk than most other real estate categories, at least in the last decade.

For investors with a lower risk tolerance, Infrastructure may be a sector to consider. These properties had a positive return on investment for all of the last 10 years, and had the lowest risk of any property sector.

Patterns Within Real Estate Return on Investment

By looking at historical patterns, investors can consider how economic conditions may affect real estate return on investment.

Sectors associated with discretionary spending, such as Retail and Lodging, have tended to perform poorly during downturns. On the other hand, Self Storage and Residential properties have historically been more resilient during the 2015 selloff and the COVID-19 pandemic.

Future trends may also offer food for thought. For example, as the population ages and the government puts an increased focus on critical facilities, could the Healthcare and Infrastructure sectors be poised for growth?

Whichever sector(s) an investor focuses in on, real estate serves as an alternative investment that can help diversify any portfolio.

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