Q4-2020 GDP (Chilled but not Frozen): The US economy closed the fourth quarter of 2020 at 1% (4% if annualized). With this figure, we know the US economy contracted (shrank) 3.5%–the worst year of growth since 1946 (the year after WWII ended). This basically means we moved into 2021 with very little momentum.
Economic Recovery Tracker Up-Tick: Our economic recovery tracker saw the largest one-week advance since Mid-June 2020 (2ppts to 76.1). Improving health conditions and rising vaccine diffusion underpinned the increase, while stronger mobility, demand, and production point to economic activity slowly turning up. Still, despite back-to-back weekly advances, the tracker remains 2.8ppts below its pre-Thanksgiving level.
China Usurps United States for Foreign Direct Investment: Each year, the United States has been the number one recipient of foreign direct investment (e.g. foreign companies building factories abroad or acquiring foreign companies), but as the consequences of the pandemic endured, those oversees investments reduced 49% in 2020. Meanwhile, China saw a net increase of 4%, and has taken first place for 2020. While the US still leads in overall foreign, direct investment, it has been experiencing a decrease each year since 2017, while China has been gradually increasing. Joseph Joyce, professor of international relations and economics at Wellesley College, commented, “Companies are reassessing their policies about global supply chains, about foreign markets, about their own use of technology…The pandemic is making all these companies rethink the most basic assumption about where they are located.”
Small Businesses Being Left Behind: On the surface, it appears Corporate America has weathered the Covid-19 crisis fairly well. (Bankruptcies are running slow. Corporate debt markets are buoyant. Business surveys are cautiously optimistic.) But the aggregate picture fails to portray the uneven nature of the corporate sector recovery. A direct indicator for struggling small businesses would be bankruptcy filings. However, small-firm bankruptcies have been surprisingly low, but that is likely due to policy support, constant uncertainty of economic recovery, and the elevated costs of filing for bankruptcy. An indirect indicator (and a strong one at that) would be that as of August 2020, 60% of all business closures turned permanent. Given the dramatic alteration of the service sectors by the pandemic, it is likely there are many more bankruptcies on the horizon.
Outlook on Emerging Markets: China continues to narrowly beat the U.S. Market averages. They were the only major economy that produced economic growth in 2020. As of now, their economy and currency appear to benefit from President Biden’s globally friendly trade priorities.
Source: The Lead-Lag Report
Technology Is Saving Lives: The most advanced artificial heart was recently approved for sales. The Aeson, a 2-pound device powered by batteries, a network of sensors, and a series of biological material, has been approved for sale in Europe. It can function for several years within a patient, functioning by attaching interconnecting biological matter to mechanical matter, and utilizing a special fluid to power and imitate the rhythms and functions of a normal heart. Patients have already received this heart and seem quite enthusiastic over its results.