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Mapped: Global Macroeconomic Risk, by Country in 2022

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This infographic is available as a poster.

Mapped: Global Macroeconomic Risk, by Country in 2022

Risk Map

This infographic is available as a poster.

The Global Macroeconomic Risk Map in 2022

When Russia invaded Ukraine, vital grain export routes shut down in Ukraine’s Port of Odesa—causing global food prices to soar.

Since then, energy markets have been disrupted, leading European heating costs to skyrocket. Meanwhile, global inflation is high, and central banks around the world are raising interest rates in response to rising price pressures.

This Markets in a Minute from New York Life Investments shows the world macroeconomic risk map in 2022 against a shifting economic landscape.

Macroeconomic Risk Map: The Methodology

Macroeconomic risk is an overarching metric that takes into account many external risk factors that could impact investor portfolios and business valuations within a country. These factors include items like monetary policy, trade flows, and the political climate.

In the data from Allianz Trade, a country’s macroeconomic risk is determined based on the following categories:

  • Economic Risk: Indebtedness, monetary policy, economic structure
  • Political Risk: Institutional independence, policy effectiveness, power concentration
  • Structural Business Environment: Ease of doing business, regulatory framework
  • Commercial Risk: Short-term demand disruption
  • Financing Risk: Risk of short-term disruptions of accounts receivables

In the context of this data, each calculation for macroeconomic risk level is ultimately a proxy representing the risk of companies not making debt payments within a given country.

Increasing Challenges

After the U.S. increased interest rates in the 1980s, many emerging markets fell into crisis as debt payments (denominated in U.S. dollars) rose. Fast forward 10 years later, and rising U.S. interest rates triggered the Mexican peso crisis in 1994.

More recently, in 2013, when the Fed began tapering its bond purchases, it led to steep investment outflows from India, Indonesia, and Brazil.

Today, as U.S. interest rates rise at the fastest pace in decades, emerging markets are facing new pressures. The good news is that some countries are absorbing the shock thanks to higher bank reserves and reasonable growth. However, at the same time, high inflation and social unrest are fueling higher risk.

Given this complex picture, which countries and jurisdictions are at the highest risk as geopolitical tensions unfold?

CountryRisk Level
🇦🇫 AfghanistanHigh Risk
🇦🇱 AlbaniaHigh Risk
🇦🇴 AngolaHigh Risk
🇦🇷 ArgentinaHigh Risk
🇦🇲 ArmeniaHigh Risk
🇧🇩 BangladeshHigh Risk
🇧🇧 BarbadosHigh Risk
🇧🇾 BelarusHigh Risk
🇧🇿 BelizeHigh Risk
🇧🇴 BoliviaHigh Risk
🇧🇦 Bosnia and HerzegovinaHigh Risk
🇧🇫 Burkina FasoHigh Risk
🇧🇮 BurundiHigh Risk
🇨🇫 Central African RepublicHigh Risk
🇹🇩 ChadHigh Risk
🇰🇲 ComorosHigh Risk
🇨🇩 Congo (Democratic Rep Of)High Risk
🇨🇬 Congo (People's Rep Of)High Risk
🇨🇺 CubaHigh Risk
🇬🇶 Equatorial GuineaHigh Risk
🇪🇷 EritreaHigh Risk
🇪🇹 EthiopiaHigh Risk
🇫🇯 FijiHigh Risk
🇬🇦 GabonHigh Risk
🇬🇲 GambiaHigh Risk
🇬🇪 GeorgiaHigh Risk
🇬🇳 Republic of GuineaHigh Risk
🇬🇼 Guinea BissauHigh Risk
🇭🇹 HaitiHigh Risk
🇮🇷 IranHigh Risk
🇮🇶 IraqHigh Risk
🇰🇿 KazakhstanHigh Risk
🇰🇬 KyrgyzstanHigh Risk
🇱🇦 LaosHigh Risk
🇱🇧 LebanonHigh Risk
🇱🇷 LiberiaHigh Risk
🇱🇾 LibyaHigh Risk
🇲🇬 MadagascarHigh Risk
🇲🇼 MalawiHigh Risk
🇲🇻 MaldivesHigh Risk
🇲🇱 MaliHigh Risk
🇲🇭 Marshall IslandsHigh Risk
🇲🇷 MauritaniaHigh Risk
🇲🇩 MoldovaHigh Risk
🇲🇳 MongoliaHigh Risk
🇲🇪 MontenegroHigh Risk
🇲🇿 MozambiqueHigh Risk
🇲🇲 Myanmar (Burma)High Risk
🇳🇷 NauruHigh Risk
🇳🇵 NepalHigh Risk
🇳🇮 NicaraguaHigh Risk
🇳🇪 NigerHigh Risk
🇳🇬 NigeriaHigh Risk
🇰🇵 North KoreaHigh Risk
🇵🇰 PakistanHigh Risk
🇵🇬 Papua New GuineaHigh Risk
🇷🇺 RussiaHigh Risk
🇸🇨 SeychellesHigh Risk
🇸🇱 Sierra LeoneHigh Risk
🇸🇧 Solomon IslandsHigh Risk
🇸🇴 SomaliaHigh Risk
🇸🇸 South SudanHigh Risk
🇱🇰 Sri LankaHigh Risk
🇸🇩 SudanHigh Risk
🇸🇷 SurinameHigh Risk
🇸🇾 SyriaHigh Risk
🇹🇯 TajikistanHigh Risk
🇹🇱 Timor LesteHigh Risk
🇹🇬 TogoHigh Risk
🇹🇴 TongaHigh Risk
🇹🇳 TunisiaHigh Risk
🇹🇲 TurkmenistanHigh Risk
🇺🇦 UkraineHigh Risk
🇺🇿 UzbekistanHigh Risk
🇻🇪 VenezuelaHigh Risk
🇾🇪 YemenHigh Risk
🇿🇲 ZambiaHigh Risk
🇿🇼 ZimbabweHigh Risk

Authoritarian rule has gripped Afghanistan, with the Taliban seeing its one-year anniversary of rule. Argentina, also at high risk, faces over 70% annual increases in inflation which could rise as much as 100% by year-end.

After the invasion of Ukraine, Russia’s risk was moved to the highest level. Despite sweeping sanctions across the ninth-largest economy in the world, GDP is projected to fall -3.4%.

Weathering the Storm

Despite often facing their own challenges, many countries continue to be deemed to have low macroeconomic risk. Several of these are in Europe, Asia, and smaller island jurisdictions, in addition to North America.

CountryRisk Level
🇦🇸 American SamoaLow Risk
🇦🇩 AndorraLow Risk
🇦🇶 AntarcticaLow Risk
🇦🇺 AustraliaLow Risk
🇦🇹 AustriaLow Risk
🇧🇪 BelgiumLow Risk
🇧🇲 BermudaLow Risk
🇻🇬 British Virgin IslandsLow Risk
🇨🇦 CanadaLow Risk
🇧🇶 Caribbean NetherlandsLow Risk
🇰🇾 Cayman IslandsLow Risk
🇨🇽 Christmas IslandLow Risk
🇨🇨 Cocos (Keeling) IslandsLow Risk
🇨🇿 Czech RepublicLow Risk
🇩🇰 DenmarkLow Risk
🇪🇪 EstoniaLow Risk
🇫🇰 Falkland IslandsLow Risk
🇫🇴 Faroe IslandsLow Risk
🇫🇮 FinlandLow Risk
🇬🇫 French GuianaLow Risk
🇫🇷 FranceLow Risk
🇹🇫 French Southern TerritoryLow Risk
🇩🇪 GermanyLow Risk
🇬🇮 GibraltarLow Risk
🇬🇱 GreenlandLow Risk
🇬🇵 GuadeloupeLow Risk
🇬🇺 GuamLow Risk
🇭🇲 Heard and McDonald IslandsLow Risk
🇮🇪 IrelandLow Risk
🇮🇹 ItalyLow Risk
🇯🇵 JapanLow Risk
🇱🇻 LatviaLow Risk
🇱🇮 LiechtensteinLow Risk
🇱🇹 LithuaniaLow Risk
🇱🇺 LuxembourgLow Risk
🇲🇹 MaltaLow Risk
🇲🇨 MonacoLow Risk
🇲🇶 MartiniqueLow Risk
🇾🇹 MayotteLow Risk
🇳🇱 NetherlandsLow Risk
🇳🇨 New CaledoniaLow Risk
🇳🇿 New ZealandLow Risk
🇳🇫 Norfolk IslandLow Risk
🇲🇵 Northern Mariana IslandsLow Risk
🇳🇴 NorwayLow Risk
🇵🇳 Pitcairn IslandsLow Risk
🇷🇪 ReunionLow Risk
🇸🇲 San MarinoLow Risk
🇸🇬 SingaporeLow Risk
🇸🇰 SlovakiaLow Risk
🇬🇸 South Georgia/Sandwich IslandsLow Risk
🇰🇷 South KoreaLow Risk
🇪🇸 SpainLow Risk
🇸🇭 St HelenaLow Risk
🇵🇲 St. Pierre Et MiquelonLow Risk
🇸🇯 Svalbard & Jan MayenLow Risk
🇸🇪 SwedenLow Risk
🇨🇭 SwitzerlandLow Risk
🇹🇼 TaiwanLow Risk
🇹🇰 TokelauLow Risk
🇹🇨 Turks & CaicosLow Risk
🇬🇧 United KingdomLow Risk
🇺🇸 United StatesLow Risk
🇻🇮 U.S. Virgin IslandsLow Risk
🇻🇦 Vatican CityLow Risk
🇼🇫 Wallis & FutunaLow Risk

Although Taiwan faces increased tensions with China, risk remains low due to strong institutions and a stable multiparty democracy. Still, China’s aim to govern the country could intensify and become more explicit.

Additionally, the United Kingdom has faced growing market instability after bold tax-cut announcements which were later abandoned. Investors have grown uneasy, illustrated by the fall in the sterling and rising gilt yields, the yields on their government bonds.

In the U.S., rising interest rates could likely place added risk on corporate debt.

Today, U.S. corporate debt stands at 80% of GDP, up from 67% in 2007. Roughly a third of this debt falls within the lowest investment-grade level, BBB. However, reforms that followed the Global Financial Crisis required banks to follow stricter capital requirements, which has put regulated institutions in a stronger position to withstand market turmoil.

Future Risks

With these factors in mind, the chart below looks at the top 10 geopolitical risks looking ahead, according to risk consulting firm Kroll.

Geopolitical Risks

The risk of Russia entirely cutting off gas supplies to Europe could present increasing challenges, especially into 2023 and 2024. This year, Russia’s gas supplies to Europe have reduced by half, causing energy prices to hit record highs. The energy crunch has precipitated corporate bailouts, including one of the highest in Germany’s history.

Global food insecurity could also accelerate if a supply crunch worsens. Russia and Ukraine supply 10% of the world’s calories and provide 26 countries with at least half of their grain products.

Another potential risk is the trend towards deglobalization. While this can be difficult to measure, some data points towards this shift. Over the past few years, world trade to GDP has stagnated after rising for several decades.

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Markets in a Minute

What is the Success Rate of Actively Managed Funds?

For actively managed funds, the odds of beating the market over the long run are like finding a needle in a haystack.

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Actively Managed Funds

What is the Success Rate of Actively Managed Funds?

Over a 20-year period, 95% of large-cap actively managed funds have underperformed their benchmark.

The above graphic shows the performance of actively managed funds across a range of fund types, using data from S&P Global via Charlie Bilello.

Missing the Mark: Actively Managed Funds

Several factors present headwinds to actively managed funds.

  • Trading costs: First, fund managers will trade more often than passive funds. These in turn incur costs, impacting returns.
  • Cash holdings: Additionally, many of these funds hold a cash allocation of about 5% or more to capture market opportunities. Unlike active funds, their passive counterparts are often fully invested. Cash holdings can have the opposite effect than intended—dragging on overall returns.
  • Fees: Active funds can charge up to 1-2% in investment manager fees while funds that tracked an index passively charged just 0.12% on average in 2022. These additional costs add up over time.

Below, we show how active funds increasingly underperform against their benchmark over each time period.

Fund Type1 Year
% Underperformed
5 Year
% Underperformed
10 Year
% Underperformed
20 Year
% Underperformed
All Large-Cap 51879195
All Small-Cap 57718994
Large-Cap Growth 74869698
Large-Cap Value 59698587
Small-Cap Growth 80598597
Small-Cap Value 41819192
Real Estate 88627487

As we can see, 51% of all large-cap active mutual funds underperformed in a one-year period. That compares to 41% of small-cap value funds, which had the best chance of outperforming the benchmark annually. Also, an eye-opening 88% of real estate funds underperformed.

For context, Warren Buffett’s firm Berkshire Hathaway has beat the S&P 500 two-thirds of the time. Even the world’s top stock pickers have a hard time beating the market’s returns.

2020 Market Crash: A Case Study

How about active funds’ performance during a crisis?

While the case for actively managed funds is often stronger during a market downturn, a 2020 study shows how they continued to underperform the index.

Overall, 74% of over 3,600 active funds with $4.9 trillion in assets did worse than the S&P 500 during the 2020 market plunge.

Stage of 2020 CycleTime Period% Underperforming S&P 500
CrisisFeb 20 - Apr 30, 202074.2
CrashFeb 20 - Mar 23, 202063.5
RecoveryMar 24 - Apr 30, 202055.8
Pre-CrisisOct 1 2019 - Jan 31, 202067.1

Source: NBER

In better news, roughly half underperformed through the recovery, the best out of any market condition that was studied.

The Bigger Impact

Of course, some actively managed funds outperform.

Still, choosing the top funds year after year can be challenging. Also note that active fund managers typically only run a portfolio for four and a half years on average before someone new takes over, making it difficult to stick with a star manager for very long.

As lower returns accumulate over time, the impact of investing in active mutual funds can be striking. If an investor had a $100,000 portfolio and paid 2% in costs every year for 25 years, they would lose about $170,000 to fees if it earned 6% annually.

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Markets in a Minute

Ranked: The Largest Bond Markets in the World

The global bond market stands at $133 trillion in value. Here are the major players in bond markets worldwide.

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The Largest Bond Markets in the World

The Largest Bond Markets in the World

In 2022, the global bond market totaled $133 trillion.

As one of the world’s largest capital markets, debt securities have grown sevenfold over the last 40 years. Fueling this growth are government and corporate debt sales across major economies and emerging markets. Over the last three years, China’s bond market has grown 13% annually.

Based on estimates from the Bank for International Statements, this graphic shows the largest bond markets in the world.

ℹ️ Total debt numbers here include both domestic and international debt securities in each particular country or region. BIS notes that international debt securities are issued outside the local market of the country where the borrower resides and cover eurobonds as well as foreign bonds, but exclude negotiable loans.

Ranked: The World’s Top Bond Markets

Valued at over $51 trillion, the U.S. has the largest bond market globally.

Government bonds made up the majority of its debt market, with over $26 trillion in securities outstanding. In 2022, the Federal government paid $534 billion in interest on this debt.

China is second, at 16% of the global total. Local commercial banks hold the greatest share of its outstanding bonds, while foreign ownership remains fairly low. Foreign interest in China’s bonds slowed in 2022 amid geopolitical tensions in Ukraine and lower yields.

Bond Market RankCountry / RegionTotal Debt OutstandingShare of Total Bond Market
1🇺🇸 U.S.$51.3T39%
2🇨🇳 China$20.9T16%
3🇯🇵 Japan$11.0T8%
4🇫🇷 France$4.4T3%
5🇬🇧 United Kingdom$4.3T3%
6🇨🇦 Canada$4.0T3%
7🇩🇪 Germany$3.7T3%
8🇮🇹 Italy$2.9T2%
9🇰🇾 Cayman Islands*$2.7T2%
10🇧🇷 Brazil*$2.4T2%
11🇰🇷 South Korea*$2.2T2%
12🇦🇺 Australia$2.2T2%
13🇳🇱 Netherlands$1.9T1%
14🇪🇸 Spain$1.9T1%
15🇮🇳 India*$1.3T1%
16🇮🇪 Ireland$1.0T1%
17🇲🇽 Mexico*$1.0T1%
18🇱🇺 Luxembourg$0.9T1%
19🇧🇪 Belgium$0.7T>1%
20🇷🇺 Russia*$0.7T>1%

*Represent countries where total debt securities were not reported by national authorities. These figures are the sum of domestic debt securities reported by national authorities and/or international debt securities compiled by BIS.
Data as of Q3 2022.

As the above table shows, Japan has the third biggest debt market. Japan’s central bank owns a massive share of its government bonds. Central bank ownership hit a record 50% as it tweaked its yield curve control policy that was introduced in 2016. The policy was designed to help boost inflation and prevent interest rates from falling. As inflation began to rise in 2022 and bond investors began selling, it had to increase its yield to spur demand and liquidity. The adjustment sent shockwaves through financial markets.

In Europe, France is home to the largest bond market at $4.4 trillion in total debt, surpassing the United Kingdom by roughly $150 billion.

Banks: A Major Buyer in Bond Markets

Like central banks around the world, commercial banks are key players in bond markets.

In fact, commercial banks are among the top three buyers of U.S. government debt. This is because commercial banks will reinvest client deposits into interest-bearing securities. These often include U.S. Treasuries, which are highly liquid and one of the safest assets globally.

As we can see in the chart below, the banking sector often surpasses an economy’s total GDP.

Banking Sector

As interest rates have risen sharply since 2022, the price of bonds has been pushed down, given their inverse relationship. This has raised questions about what type of bonds banks hold.

In the U.S., commercial banks hold $4.2 trillion in Treasury bonds and other government securities. For large U.S. banks, these holdings account for almost 24% of assets on average. They make up an average 15% of assets for small banks in 2023. Since mid-2022, small banks have reduced their bond holdings due to interest rate increases.

As higher rates reverberate across the banking system and wider economy, it may expose further strains on global bond markets which have expanded rapidly in an era of dovish monetary policy and ultra-low interest rates.

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