Finance Explained

With lockdown still in place in many countries around the world, it may be hard to look to the future and feel optimistic about the prospects for the global economy. However, data from the World Bank (January 2021) states that the global economy is expected to grow by 4% in 2021. This forecast comes with the assumption that the Covid-19 vaccine rollout is as expected. It is worth reviewing this data alongside the decrease in the global economy in 2020 which showed a contraction of 4.3% (World Bank, January 2021). This means that the overall size of the global economy would remain slightly under its previous levels, albeit on a more positive trajectory.  The World Bank take the view that the contraction in the global economy was 'slightly less severe than previously projected' which was down to advanced economies been less badly hit than expected along with a 'more robust' recovery in China.  They do offer the caveat that should the vaccine rollout be delayed then they o

2020 saw many records in the investment markets and the 10-year US Treasury yields were no exception as they saw record lows. If we look at the data over the last year in the chart below (source: CNBC), then the impact of Coronavirus from February 2020 is clear. A sharp dip into March 2020 and then a slow, steady recovery from August 2020, but not the same recovery to previous levels and beyond that we have seen in many of the stock markets.  Indeed, if we look at the longer term trends going all the way back to the 1980s, then 2020 saw record lows as per the chart below (source: CNBC). The chart also illustrates the longer term trend with a steady decline in the yields over the past forty years (the thought of a peak 15% yield back in the early 80s, where could you find that kind of yield these days!). Looking at the longer term trends you may believe that the yields cannot get much lower and then a continued steady recovery is the likely way forward.  But, as ever, in the current cli