2020 GDP Growth by Country, U.S. Manufacturing Revival, Foreign Investment
In today’s Steady Investor, we look at key factors that we believe are currently impacting the market, such as:
- 2020’s economic growth roundup
- Economic evolution from industrial to service-based economy
- The importance of foreign direct investment
Economic Growth Roundup, 2020 Edition – There’s no need to restate all of the economic challenges 2020 presented. But the pain was not delivered equally across the world – some countries weathered the storm better than others, and in the case of China, actually grew for the year. One developed economy in particular that fared well on a relative basis was South Korea, which contracted only -1% in 2020. The Bank of Korea attributed the growth to rapid and strong pandemic-response measures, as well as South Korea’s large manufacturing base and strong e-commerce base. One developed economy that fared particularly poorly was the U.K., which is estimated to have contracted over -11% over the last year.1 The U.K. was already weak going into the pandemic – Brexit uncertainty was dragging sentiment and investment across the country, and the pandemic did not play into the U.K.’s economic strong suits, services, and spending. Here is a round-up of estimated GDP growth for other key developed countries, according to the OECD:
- United States: -3.8%
- Japan: -5.2%
- Germany: -5.8%
- Euro Area: -7.8%
- France: -9%
- Italy: -9%
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The Coronavirus pandemic has impacted the economy in many ways, which can cause investors to question what’s coming next. While you may not be able to predict what comes next, you can prepare you investments with the right investment strategy! Using the right investment strategy can make a huge difference in preparing your long-term investments for success and can help you navigate these challenging and unprecedented times.
To help you learn more about strategies that cater to different investment objectives, we have created our Dean’s List of Investment Strategies. Our Dean’s List describes five of our investment strategies that are ranked in the top of their respective classes by Morningstar (as of 12/31/20).2
If you have $500,000 or more to invest and want to learn about five of our top strategies, click on the link below.
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Is a Manufacturing Renaissance Coming to the U.S.? As you can see from the chart below, manufacturing jobs in the U.S. have been in steady decline since the early 1980’s. There are many factors for the decline, but perhaps the most significant has been the economy’s evolution from an industrial economy to a service-based economy. And, of course, technological innovation has played a big role too. Many attempts have been made to save manufacturing jobs, but the policy is arguably not powerful enough to counteract technological and fundamental shifts in the economy. There may be an upshot in the offing, however: the auto industry’s rapid-fire shift to investment in electric vehicles (EVs) is driving strong demand for a new type of manufacturing – lithium-ion batteries. China is currently the top market for the production of lithium-ion EV batteries, but auto-makers in the U.S. are pivoting investment domestically, with sights on developing supply chains for batteries and related materials. Over the next decade and beyond, as the market for EVs grows quickly, the U.S.’s battery-making capacity is expected to increase sharply.4
Source: Federal Reserve Bank of St. Louis5
The Importance of Foreign Direct Investment – A key part of sustainable, long-term economic growth is investment – private fixed investment (at the corporate level), government investment, and lastly, foreign direct investment. The latter category involves countries and corporations investing in other countries, whether it’s to develop supply chains, establish end markets, or to drive sales. As a general rule, more investment is good for economic growth, so every country should have the incentive to invest more, always, in our view. In 2020, China overtook the United States as the world’s top country for foreign direct investment, a title the U.S. should make every effort to reclaim. It should not be difficult, in our view – foreign direct investment by overseas businesses into the U.S. fell 49% in 2020, an anomaly tied to the pandemic. Over the same period, China saw direct investment increase by 4%. Once the risk of the pandemic fades, the U.S. should be able to reclaim the top spot and should make every effort to stay there, in our view.6
The current pandemic will continue to impact markets and economies around the world, but don’t let it stop you from making the right investments that can help you in the long run! Finding the right investment strategy can make a huge difference when managing the highs and lows of the market. To help you learn more about strategies that cater to different investment objectives, we have created our Dean’s List of Investment Strategies.7
Our Dean’s List describes five of our investment strategies that are ranked in the top of their respective classes, according to Morningstar (as of 12/31/20).8 If you have $500,000 or more to invest and want to learn more about these strategies, click on the link below to see how they could potentially benefit you.
2 These rankings may not be representative of any one client’s experience. In addition, they are not indicative of future performance
3 ZIM may amend or rescind the “Dean’s List of Investment Strategies” guide for any reason and at ZIM’s discretion.
4 Wall Street Journal. January 26, 2021. https://www.wsj.com/articles/u-s-mounts-a-charge-to-take-on-china-the-king-of-electric-vehicle-batteries-11611658235
5 Fred Economic Data. January 8, 2021. https://fred.stlouisfed.org/series/MANEMP
6 Forbes. January 24, 2021. https://www.forbes.com/sites/sarahhansen/2021/01/24/china-passes-us-as-no-1-destination-for-foreign-investment-as-coronavirus-upends-global-economy/?sh=1189d18d1252
7 ZIM may amend or rescind the “Dean’s List of Investment Strategies” guide for any reason and at ZIM’s discretion.
8 These rankings may not be representative of any one client’s experience. In addition, they are not indicative of future performance
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.
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Returns for each strategy and the corresponding Morningstar Universe reflect the annualized returns for the periods indicated. The Morningstar Universes used for comparative analysis are constructed by Morningstar (median performance) and data is provided to Zacks by Zephyr Style Advisor. The percentile ranking for each Zacks Strategy is based on the gross comparison for Zacks Strategies vs. the indicated universe rounded up to the nearest whole percentile. Other managers included in universe by Morningstar may exhibit style drift when compared to Zacks Investment Management portfolio. Neither Zacks Investment Management nor Zacks Investment Research has any affiliation with Morningstar. Neither Zacks Investment Management nor Zacks Investment Research had any influence of the process Morningstar used to determine this ranking.