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Markets in a Minute

The World Macroeconomic Risk Map in 2020

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

Macroeconomic Risk by Country

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

The World Macroeconomic Risk Map in 2020

In times of crisis, risk is thrown under the microscope and former assumptions are reassessed.

From the political climate to the flow of international trade, the impact of COVID-19 has destabilized macroeconomic conditions in many jurisdictions globally.

The above Markets in a Minute chart from New York Life Investments is a macroeconomic risk map of 241 countries and regions as global economies shift.

Measuring Risk

Data for the risk map comes from Euler Hermes, and it scores macroeconomic risk primarily based on the following categories: political risk, structural business environment, commercial risk, and financing risk.

The political risk category, for example, takes into account the concentration of power in a country. It also assesses the degree of independence of national institutions and social cohesion.

In total, a country’s macroeconomic risk profile is determined, representing the broad risk of non-payment of companies within a country.

Highest Macroeconomic Risk

Given the sheer weight of the current economic climate, which countries have the highest macroeconomic risk?

CountryRisk Level
🇦🇫 AfghanistanHigh Risk
🇦🇱 AlbaniaHigh Risk
🇦🇴 AngolaHigh Risk
🇦🇷 ArgentinaHigh Risk
🇦🇲 ArmeniaHigh Risk
🇦🇿 AzerbaijanHigh Risk
🇧🇩 BangladeshHigh Risk
🇧🇧 BarbadosHigh Risk
🇧🇾 BelarusHigh Risk
🇧🇿 BelizeHigh Risk
🇧🇴 BoliviaHigh Risk
🇧🇦 Bosnia and HerzegovinaHigh Risk
🇧🇮 BurundiHigh Risk
🇨🇲 CameroonHigh Risk
🇨🇻 Cape Verde IslandsHigh Risk
🇨🇫 Central African RepublicHigh Risk
🇹🇩 ChadHigh Risk
🇰🇲 ComorosHigh Risk
🇨🇩 Congo (Democratic Rep Of)High Risk
🇨🇬 Congo (People's Rep Of)High Risk
CubaHigh Risk
DjiboutiHigh Risk
Equatorial GuineaHigh Risk
EritreaHigh Risk
FijiHigh Risk
GabonHigh Risk
GambiaHigh Risk
GeorgiaHigh Risk
Guinea (Rep Of)High 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
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
TurkmenistanHigh Risk
UkraineHigh Risk
UzbekistanHigh Risk
VenezuelaHigh Risk
YemenHigh Risk
ZambiaHigh Risk
ZimbabweHigh Risk

Argentina’s soaring inflation is estimated to reach 40.7% in 2020. Coupled with a poorly-timed debt restructuring, its economy is anticipated to shrink 12% over the course of the year. Yet for all its hardship, the country managed to send COVID-19 relief money to its citizens in just three days.

Meanwhile, countries including Venezuela and Bolivia are at steeper risk, compounded by their heavy reliance on commodity exports, such as oil.

Medium to Sensitive Risk

Overall, roughly 100 jurisdictions live within this mid-range risk threshold.

CountryRisk Level
🇦🇼 ArubaMedium Risk
🇧🇼 BotswanaMedium Risk
🇧🇷 BrazilMedium Risk
🇧🇬 BulgariaMedium Risk
🇨🇳 ChinaMedium Risk
🇭🇷 CroatiaMedium Risk
🇨🇾 CyprusMedium Risk
🇩🇴 Dominican RepublicMedium Risk
🇸🇻 El SalvadorMedium Risk
🇬🇷 GreeceMedium Risk
🇬🇹 GuatemalaMedium Risk
🇭🇺 HungaryMedium Risk
🇮🇸 IcelandMedium Risk
🇮🇳 IndiaMedium Risk
🇮🇩 IndonesiaMedium Risk
🇯🇴 JordanMedium Risk
🇰🇼 KuwaitMedium Risk
🇲🇦 MoroccoMedium Risk
🇳🇺 NiueMedium Risk
ParaguayMedium Risk
PhilippinesMedium Risk
QatarMedium Risk
RomaniaMedium Risk
RwandaMedium Risk
Saudi ArabiaMedium Risk
ThailandMedium Risk
Trinidad & TobagoMedium Risk
AnguillaMedium Risk
BahamasMedium Risk
BruneiMedium Risk
ChileMedium Risk
ColombiaMedium Risk
Costa RicaMedium Risk
French PolynesiaMedium Risk
Hong KongMedium Risk
IsraelMedium Risk
LatviaMedium Risk
LithuaniaMedium Risk
MacaoMedium Risk
MalaysiaMedium Risk
MauritiusMedium Risk
MexicoMedium Risk
MontserratMedium Risk
PanamaMedium Risk
PeruMedium Risk
PolandMedium Risk
PortugalMedium Risk
Puerto RicoMedium Risk
SloveniaMedium Risk
United Arab EmiratesMedium Risk
UruguayMedium Risk
AlgeriaSensitive Risk
Antigua & BarbudaSensitive Risk
BahrainSensitive Risk
BeninSensitive Risk
BhutanSensitive Risk
Burkina FasoSensitive Risk
CambodiaSensitive Risk
Cook IslandsSensitive Risk
Côte d'IvoireSensitive Risk
CuracaoSensitive Risk
DominicaSensitive Risk
EcuadorSensitive Risk
EgyptSensitive Risk
EswatiniSensitive Risk
EthiopiaSensitive Risk
GhanaSensitive Risk
GrenadaSensitive Risk
GuyanaSensitive Risk
HondurasSensitive Risk
JamaicaSensitive Risk
KenyaSensitive Risk
KiribatiSensitive Risk
LesothoSensitive Risk
MicronesiaSensitive Risk
NamibiaSensitive Risk
North MacedoniaSensitive Risk
OmanSensitive Risk
PalauSensitive Risk
RussiaSensitive Risk
SamoaSensitive Risk
Sao Tome & PrincipeSensitive Risk
SenegalSensitive Risk
SerbiaSensitive Risk
South AfricaSensitive Risk
St. Kitts & NevisSensitive Risk
St. LuciaSensitive Risk
St. MaartenSensitive Risk
St. Vincent & The GrenadinesSensitive Risk
TanzaniaSensitive Risk
TunisiaSensitive Risk
TurkeySensitive Risk
TuvaluSensitive Risk
UgandaSensitive Risk
VanuatuSensitive Risk
VietnamSensitive Risk

As Russia contends with sanctions and counter-sanctions with the West, its political conditions face greater risks. Alongside this, increased involvement in the Syria crisis also factors negatively.

On the other hand, Indonesia’s strong banking system and solid fiscal policies are met with interest rates that fall around 4%. This means that its central bank has leeway to lower interest rates to help spur growth.

Lowest Macroeconomic Risk

As the dust begins to settle, which countries are positioned with the least risk?

France’s high quality education system and diversified economy provide key strengths. Sweden, also with a highly educated population, is cushioned with solid public finances. Also, its R&D spending is among the highest globally.

Meanwhile, Japan, Taiwan, and South Korea have favorable factors at play.

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

How about the U.S.? Backed by the world’s reserve currency, its strengths rest on its diverse GDP and low interest rates. However, the implications of high corporate debt—climbing to $10.2 trillion—weighs significantly, not to mention increasing political fragmentation.

As central banks in wealthy countries press ahead, the end of stimulus packages still seems like a distant prospect. Together, rich nations are projected to borrow a combined 17% of their GDP in this year alone. This, matched with low inflation, is helping to defend economies from collapse.

Still, it raises a key question—is this necessary for a sustainable global recovery ahead?

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Markets in a Minute

Which ESG Risks Are Affecting Your Portfolio?

It’s important for investors to identify which sustainability issues they’re most exposed to. Find out more in this breakdown of ESG risk by industry.

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Visualizing ESG Risk by Industry

Aging populations, climate change, and data security are some of the world’s most pressing issues, but what theme do they all share? For investors, the answer is certain: sustainability.

Sustainability is a concept that’s quickly moved into the mainstream, and is best described as the consideration of environmental, social, and governance (ESG) factors when analyzing companies. Combining these non-financial metrics with traditional analysis has been proven to have a positive influence on long-term returns.

In this Markets in a Minute chart from New York Life Investments, we’ve mapped the ESG risk profiles of four prominent industries to gain a better understanding of the sustainability issues they’re likely facing.

Fossil Fuels

Investors in this sector have substantial exposure to all three ESG risks, with environmental issues being the most significant.

RiskImportanceIssues to Consider

Environmental

High
  • The global transition to green energy
  • Stricter environmental regulations
  • Harm from spills and other accidents

Social

Medium
  • Strained community relations
  • Shifting consumer attitudes

Governance

Medium
  • Shareholder transparency
  • Risk management structure

The global transition to renewable energy paints a complex future for the sector, though it’s uncertain when oil demand will peak—predictions range from 2025 all the way to 2040. Nevertheless, market participants are taking action. To date, over 1,200 institutional investors representing $14 trillion in assets have made commitments to divest from fossil fuels.

Social risks are another source of uncertainty, especially as public awareness around climate change increases. A planned expansion of the Keystone Pipeline System, referred to as Keystone XL, has faced nearly a decade of public resistance and currently remains blocked by the U.S. Supreme Court.

Last but not least are governance risks. With many investors considering the switch to a fossil fuel-free portfolio, shareholder transparency will be of utmost importance. The onus will be on company management to demonstrate that they have a clear understanding of the risks and opportunities ahead. Royal Dutch Shell, the world’s fourth largest oil company, has made progress on this front by announcing its strategy for achieving net-zero emissions by 2050.

Financials

Social and governance risks are the top priorities for investors in the financial sector. Firms that finance the fossil fuel industry may have indirect exposure to environmental risks.

RiskImportanceIssues to Consider

Environmental

Low
  • Indirect exposure to the fossil fuel industry

Social

Medium
  • Aggressive or deceptive selling practices
  • Client relations


Governance

Medium
  • Corporate governance
  • Executive compensation

Underpinning the strength of the financial sector is consumer trust and client service. By using aggressive or deceptive selling practices, firms risk severe reputational damage and even financial penalties. Wells Fargo, America’s fourth largest bank, was recently fined $3 billion for its account fraud scandal that emerged in 2016.

These issues are closely related to governance risks, where weak internal structures can allow fraudulent activities like money laundering to take place. In fact, over a 15 month period ending in 2019, global banks were fined $10 billion for engaging in the activity. Experts believe that 60% of laundering fines resulted from criminals slipping past screening systems.

Healthcare

Social risks are the top concern for healthcare investors, given the sector’s important role in public health and well-being.

RiskImportanceIssues to Consider

Environmental

Low
  • Chemical activities

Social

Medium
  • Product safety and recalls
  • Inappropriate or misleading marketing

Governance

Low
  • Patient privacy

Unsafe products are one the most clear-cut issues because they directly harm society and shareholders. Johnson & Johnson, one of the world’s largest healthcare companies, has faced thousands of lawsuits for failing to warn consumers about asbestos in its baby powder products. The company was recently ordered to pay $2.1 billion in damages by a Missouri appeals court.

The use of inappropriate advertising is another issue that investors may want to watch out for. In 2019, Mundipharma was fined by the Australian government for making inaccurate statements in its marketing materials for opioids.

Software & IT Services

Companies in this sector are exposed to various social and governance risks, but are not known to be large polluters.

RiskImportanceIssues to Consider

Environmental

Low
  • Operation of data centers

Social

High
  • User privacy
  • Data security

Governance

Medium
  • Shareholder structure
  • Antitrust disputes

Many firms in this industry collect and monetize user data, exposing their shareholders to data privacy and security risks. Facebook has been at the center of numerous controversies in recent years, including the Cambridge Analytica scandal, which saw the unconsented collection of personal data from 87 million users. Polls found that 44% of Facebook users viewed the platform more negatively after the scandal.

These risks are likely to be amplified as governments take a firmer stance on data regulation. In 2018, the EU implemented its General Data Protection Regulation (GDPR), one of the world’s toughest privacy and security laws. In certain cases, noncompliance with the GDPR can result in fines equal to 4% of a company’s global revenues.

Navigating an Uncertain Future

Global sustainability issues are creating a more challenging environment for businesses in all types of industries. To hedge these risks, investors are turning to ESG in massive numbers—the value of sustainably managed assets now sits at $40.5 trillion, nearly double the amount from four years ago.

It’s important to remember, however, that businesses are unique. A social issue affecting one industry may not be as relevant for another. When armed with this knowledge, investors will be able to make more informed decisions that strengthen the long-term resiliency of their portfolios.

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Markets in a Minute

U.S. Dollar Performance After U.S. Elections

How much influence do elections have? We show U.S dollar performance after U.S. elections to illustrate there’s no clear trend between the two.

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U.S. Dollar Performance After U.S. Elections

News outlets often draw correlations between U.S. elections and market performance. In turn, some investors opt for more conservative portfolios until the election uncertainty is overcome. But how much influence do elections really have?

In this Markets in a Minute from New York Life Investments, we show U.S. dollar performance after U.S. elections to illustrate that there is no clear trend between the two.

What is the U.S. Dollar Index?

To start, we used the U.S. Dollar Index to track performance, which measures the U.S. dollar relative to a basket of six currencies.

CurrencyWeight
Euro57.6%
Japanese Yen13.6%
British Pound11.9%
Canadian Dollar9.1%
Swedish Krina4.2%
Swiss Franc3.6%

Source: Intercontinental Exchange

Any changes in these respective currencies can affect the performance of the U.S. dollar.

Post-Election Performance

For each U.S. election from 1988 to 2016, we calculated the U.S. dollar index’s percentage change since election day. Changes were tracked over the course of a year, or 250 trading days.

There was no clear trend in U.S. dollar performance after U.S. elections. Here’s another look at the data, this time showing the range in changes over the year and percentage change at the end of the period.

U.S. Dollar Performance After U.S. Elections

The U.S. dollar finished up in four years, and down in the other four years. The years after the 1988, 1996, and 2008 elections saw the largest fluctuations in values.

In 1989, the U.S. dollar surged due to three factors:

  • High interest rates, which attracted foreign investment
  • Political instability in West Germany and Japan
  • Strength of American stock and bond markets

In the period after the 1996 election, the dollar climbed again. While foreign currencies collapsed amid the Asian financial crisis, the U.S. economy enjoyed rapid growth and was seen as a safe haven for investors.

On the flip side, the U.S. dollar saw significant declines in the year after the 2008 election. The European Central Bank lowered rates in response to the global financial crisis, raising confidence in the euro and causing the U.S. dollar to fall.

What Investors Can Focus On

In each case above, significant movements were caused by macroeconomic factors, rather than the outcome of the U.S. election.

Here are a few factors that can have a direct impact on market performance:

  1. Inflation decreases the value of a dollar over time. Investors should consider how prevailing interest rates compare to inflation, and look for assets that build wealth over time.
  2. Unemployment rates have widespread impact. When unemployment is high, economic output and consumer spending are reduced.
  3. Economic growth signals healthy demand, and may boost corporate profits and drive up asset prices.

While elections can cause investors to change their asset mix, it’s important for investors to focus on long-term, broader factors that directly influence the market.

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