Daily Brief: Here’s What Happened To The Global Economy This Year

Daily Brief: Here’s What Happened To The Global Economy This Year

about 2 years ago3 mins

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The global economy bounced back in earnest in 2021, but you don’t have to be Einstein to know that everything looks better next to the year before…

What does this mean?

We won’t know exactly how much the global economy grew in 2021 until the data is released early next year, but economists are expecting the “real” economy – that is, adjusted for inflation – to grow 5.8% this year compared to 2020. They reckon all the world’s major regions will have pulled their weight, with the US expected to grow 5.5%, Europe 5.1%, and China a massive 8% versus last year.

Everything’s relative, of course, and 2020 was one of the worst years for economic growth since the Great Depression. And it’s not like we haven’t had our fair share of bumps in the road, most notably from inflation: the prices of goods and services are set to end the year 3.7% higher globally than last…

Why should I care?

For you personally: Give with one hand…

This has had all kinds of repercussions on you personally. Jobs have been easy to come by, and you’ve been paid better for them too – not least because workforce shortages have left companies upping their game to win you over. The bad news is that US wages – which climbed by 4.8% in November compared to the year before – have been outstripped by the country’s higher prices, which jumped 6.8% in the same period.

US wages

For markets: Central banks go from hero to zero.

Central banks were the darlings of 2020, stepping in with unprecedented cash injections when the pandemic took hold. This year, though, investors have become increasingly frustrated with the party line that high inflation is “transitory”. The US Federal Reserve finally admitted in November that it’s been a bit too optimistic, but that’s left the central bank with a lot of catching up to do in 2022…

US inflation

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2021's Biggest Winners And Losers

Markets review image

Investors have been trying to find gains wherever they can this year, but they’ve definitely had a few old favorites on repeat.

What does this mean?

US stocks had an impressive 2021: the S&P 500 – the country’s key index – climbed 29% on the back of a rebound in demand, injections of government support, and a meme stock-inspired influx of retail investors. Commodities have been going from strength to strength too, with a key index up 39% as demand for energy and raw materials surged. Government bonds, not so much: investors sold them off as they became more confident in the overall recovery and, by extension, the stock market – not to mention as inflation (which makes bonds worth less) poked its head above the parapet.

SP 500
​​Source: Google Finance

Why should I care?

For markets: The winners and losers.

The stock market had a few MVPs this year: Moderna climbed 116%, Nvidia 131%, and Ford 144%. And though it feels like a long time ago now, remember this was the year in which GameStop jumped 1,800% in the space of three weeks. As for the year’s losers, Alibaba’s stock – battered by China’s common prosperity-inspired crackdowns – lost 50% of its value this year, sending its shares to a more than four-year low. Robinhood was down in the dumps too: the trading platform’s stock is now worth less than half the price it listed at in July, as its user growth plummeted and the risk of regulation loomed.

Gamestop

The bigger picture: Is it time to cut and run?

Interest rates were so low this year that savings and government bonds barely paid anything, which has made risky investments all the more appealing. That goes some way to explain why bitcoin and ether have climbed 65% and 416% this year. Trouble is, when interest rates do go up, riskier investments could be the first to be dumped by investors…

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