Golden Bulls: Visualizing the Price of Gold from 1792-2020


This post is by Nicholas LePan from Visual Capitalist

Golden Bulls

Golden Bulls: Visualizing the Price of Gold from 1792 – 2020

Some people view gold as useless metal in the digital age. It does not produce income, it sits in vaults and has limited industrial applications. But nonetheless it consistently goes up in price.

Gold will always be gold, and it has steadily provided security and value as financial markets go up, down or disappear.

Today’s infographic comes to us from Sprott Physical Bullion Trust and outlines how gold while always valuable, goes through periods of extreme bull markets, one of which we are in now.

Gold as Money: Gold-backed Currency in the United States

During the early days of the American Republic, the United States used the British gold standard to set the price of its currency. In 1791, it set the price of gold at $19.49 per ounce but also allowed silver redemption in silver. In 1834, it raised the price of gold to $20.69 per ounce.

The price of gold remained relatively stable through depressions, civil wars and the first world war. It would not be until the beginning of the great depression when gold really started to shine.

The 1929 stock market crash marked the beginning of the end for gold as money in the United States. In the wake of the financial collapse, investors started redeeming paper currency for its value in gold, removing currency from the economy.

In 1933, President Franklin D. Roosevelt limited the private ownership of gold to discourage hoarding. In 1934, Congress passed the Gold Reserve Act which prohibited the private ownership of gold and raised the price of gold to $35 per ounce.

In 1944, the victorious allied powers negotiated the Bretton Woods Agreement, making the U.S. dollar the official global currency. The United States ensured the price of gold at $35 per ounce until the onset of a stagnant economy in the early seventies.

End of the Gold Standard and A New Economic Order

In 1971, President Nixon mandated the Federal Reserve to stop honoring the U.S. dollar’s value in gold. This meant foreign central banks no longer could exchange their american dollars for gold, functionally taking the dollar off the gold standard.

By 1980, the price of gold had surged to $594.92 amidst an environment of rising inflation in the American economy. The Fed ended inflation with double-digit interest rates which in turn slowed the economy, causing a recession.

The price of gold dropped to $410 per ounce and remained around this price until 1996 when it dropped to $288 per ounce in response to steady economic growth. The shine returned to gold after a series of economic crises, such as the tech boom bubble, 9/11 terrorist attacks and a recession in 2011.

Radical Monetary Policies: Bubble Economies and Paper Mach Policies

In 2008, the Global financial Crisis shook the world which saw the dramatic collapse of asset values around the world, resulting in economic retraction. Policy makers and central bankers embarked on a controversial policy of quantitative easing to support financial markets. Gold rose to $869 per ounce during the 2008 financial crisis and would continue so.

The price of one ounce of gold hit an all-time record of $1,895 on Sept. 5, 2011, in response to worries that the United States would default on its debt. During this period, Gold investors saw returns of 611% over 144 months.

As the economy regained its legs, the price of gold waned during a period of economic prosperity that glossed over the effects of money printing.

Gold reached a peak of $1891 in September 2011, and retraced to a low of $1050 by December 2015. It was not until the beginning of a new American presidency that gold rose again.

Gold and the New Financial Landscape

In the 54 months since December 2015 to today, the price of gold increased 62% and reached a high of $1751 on May 15, 2020. A debt-fueled economic recovery growing old, a trade war with China and the recent COVID crisis has once again provoked economic uncertainty and a renewed interest in gold.

With interest rates already at historic lows and quantitative easing as standard operating procedure, global economies are entering unprecedented territory for the economy and the price of gold amidst the backdrop of a pandemic and record government spending.

Gold in Perspective

In an era to tech startups, ETFs and financial wizardry, many people consider gold as just a shiny paper weight but its performance compared to other assets shows it is far from this.

In 1792, an ounce of gold was worth about $19.49 and as of May 15, 2020, $1751. While no has lived this long, gold has proven its value over time as companies, countries and governments come and go.

Now more than ever in an era of central bank quantitative easing and ending bailouts, Gold will continue to preserve its value and offer its owners value and security against financial markets and currencies.

Golden Bulls are no idle idol worshipers in this era of radical monetary policy.

The post Golden Bulls: Visualizing the Price of Gold from 1792-2020 appeared first on Visual Capitalist.

All of the World’s Money and Markets in One Visualization


This post is by Jeff Desjardins from Visual Capitalist

All of the World's Money and Markets in One Visualization, 2020 Edition

Did you know you can use this visualization?

All of the World’s Money and Markets in One Visualization

In the current economic circumstances, there are some pretty large numbers being thrown around by both governments and the financial media.

The U.S. budget deficit this year, for example, is projected to hit $3.8 trillion, which would be more than double the previous record set during the financial crisis ($1.41 trillion in FY2009). Meanwhile, the Fed has announced “open-ended” asset-buying programs to support the economy, which will add even more to its current $7 trillion balance sheet.

Given the scale of these new numbers—how can we relate them back to the more conventional numbers and figures that we may be more familiar with?

Introducing the $100 Billion Square

In the above data visualization, we even the playing field by using a common denominator to put the world’s money and markets all on the same scale and canvas.

Each black square on the chart is worth $100 billion, and is not a number to be trifled with:

What is in a $100 billion square?

In fact, the entire annual GDP of Cuba could fit in one square ($97 billion), and the Greek economy would be roughly two squares ($203 billion).

Alternatively, if you’re contrasting this unit to numbers found within Corporate America, there are useful comparisons there as well. For example, the annual revenues of Wells Fargo ($103.9 billion) would just exceed one square, while Facebook’s would squeeze in with room to spare ($70.7 billion).

Billions, Trillions, or Quadrillions?

Here’s our full list, which sums up all of the world’s money and markets, from the smallest to the biggest, along with sources used:

Category Value ($ Billions, USD) Source
Silver $44 World Silver Survey 2019
Cryptocurrencies $244 CoinMarketCap
Global Military Spending $1,782 World Bank
U.S. Federal Deficit (FY 2020) $3,800 U.S. CBO (Projected, as of April 2020)
Coins & Bank Notes $6,662 BIS
Fed’s Balance Sheet $7,037 U.S. Federal Reserve
The World’s Billionaires $8,000 Forbes
Gold $10,891 World Gold Council (2020)
The Fortune 500 $22,600 Fortune 500 (2019 list)
Stock Markets $89,475 WFE (April 2020)
Narrow Money Supply $35,183 CIA Factbook
Broad Money Supply $95,698 CIA Factbook
Global Debt $252,600 IIF Debt Monitor
Global Real Estate $280,600 Savills Global Research (2018 est.)
Global Wealth $360,603 Credit Suisse
Derivatives (Market Value) $11,600 BIS (Dec 2019)
Derivatives (Notional Value) $558,500 BIS (Dec 2019)
Derivatives (Notional Value – High end) $1,000,000 Various sources (Unofficial)

Derivatives top the list, estimated at $1 quadrillion or more in notional value according to a variety of unofficial sources.

However, it’s worth mentioning that because of their non-tangible nature, the value of financial derivatives are measured in two very different ways. Notional value represents the position or obligation of the contract (i.e. a call to buy 100 shares at the price of $50 per share), while gross market value measures the price of the derivative security itself (i.e. $1.00 per call option, multiplied by 100 shares).

It’s a subtle difference that manifests itself in a big way numerically.

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Charting the Rise and Fall of the Global Luxury Goods Market


This post is by Katie Jones from Visual Capitalist

Charting the Rise and Fall of the Global Luxury Goods Market

The Rise and Fall of the Global Luxury Goods Market

Global demand for personal luxury goods has been steadily increasing for decades, resulting in an industry worth $308 billion in 2019.

However, the insatiable desire for consumers to own nice things was suddenly interrupted by the coming of COVID-19, and experts are predicting a brutal contraction of up to one-third of the current luxury good market size this year.

Will the industry bounce back? Or will it return as something noticeably different?

A Once Promising Trajectory

The global luxury goods market—which includes beauty, apparel, and accessories—has compounded at a 6% pace since the 1990s.

Recent years of growth in the personal luxury goods market can be mostly attributed to Chinese consumers. This geographic market accounted for 90% of total sales growth in 2019, followed by the Europe and the Americas.

Analysts suggest that China’s younger luxury goods consumers in particular have significant spending power, with an average spend of $6,000 (¥41,000) per person in pre-COVID times.

An Industry Now in Distress

The lethal combination of reduced foot traffic and decreased consumer spending in the first quarter of 2020 has brought the retail industry to its knees.

In fact, more than 80% of fashion and luxury players will experience financial distress as a result of extended store closures.

luxury market McKinsey supplemental

With iconic luxury retailers such as Neiman Marcus filing for bankruptcy, the pressure on the luxury industry is clear. It should be noted however, that companies who were experiencing distress before the COVID-19 outbreak will be the hardest hit.

Predicting the Collapse

In a recent report, Bain & Company estimated a 25% to 30% global luxury market contraction for the first quarter of 2020 based on several economic variables. They have also modeled three scenarios to predict the performance for the remainder of 2020.

  • Optimistic scenario: A limited market contraction of 15% to 18%, assuming increased consumer demand for the second and third quarter of the year, roughly equating to a sales decline of $46 billion to $56 billion.
  • Intermediate scenario: A moderate market contraction of between 22% and 25%, or $68 to $77 billion.
  • Worst-case scenario: A steep contraction of between 30% and 35%, equating to $92 billion to $108 billion. This assumes a longer period of sales decline.

Although there are signs of recovery in China, the industry is not expected to fully return to 2019 levels until 2022 at the earliest. By that stage, the industry could have transformed entirely.

Changing Consumer Mindsets

Since the beginning of the pandemic, one-quarter of of consumers have delayed purchasing luxury items. In fact, a portion of those who have delayed purchasing luxury goods are now considering entirely new avenues, such as seeking out cheaper alternatives.

However, most people surveyed claim that they will postpone buying luxury items until they can get a better deal on price.

luxury market supplemental

This frugal mindset could spark an interesting behavioral shift, and set the stage for a new category to emerge from the ashes—the second-hand luxury market.

Numerous sources claim that pre-owned luxury could in fact overtake the traditional luxury market, and the pandemic economy could very well be a tipping point.

The Future of Luxury

Medium-term market growth could be driven by a number of factors, from a global growing middle class and their demand for luxury products, as well as retailers’ sudden shift to e-commerce.

While analysts can only rely on predictions to determine the future of personal luxury, it is clear that the industry is at a crossroads.

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Visualizing the Countries Most Reliant on Tourism


This post is by Dorothy Neufeld from Visual Capitalist

Visualizing the Countries Most Reliant on Tourism

Visualizing the Countries Most Reliant on Tourism

Without a steady influx of tourism revenue, many countries could face severe economic damage.

As the global travel and tourism industry stalls, the spillover effects to global employment are wide-reaching. A total of 330 million jobs are supported by this industry around the world, and it contributes 10%, or $8.9 trillion to global GDP each year.

Today’s infographic uses data from the World Travel & Tourism Council, and it highlights the countries that depend the most on the travel and tourism industry according to employment—quantifying the scale that the industry contributes to the health of the global economy.

Ground Control

Worldwide, 40 countries rely on the travel and tourism industry for more than 15% of their total share of employment. Unsurprisingly, many of the countries suffering the most economic damage are island nations.

At the same time, data reveals the extent to which certain larger nations rely on tourism. In New Zealand, for example, 479,000 jobs are generated by the travel and tourism industry, while in Cambodia tourism contributes to 2.4 million jobs.

Rank Country T&T Share of Jobs (2019) T&T Jobs (2019) Population
1 Antigua & Barbuda 91% 33,800 97,900
2 Aruba 84% 35,000 106,800
3 St. Lucia 78% 62,900 183,600
4 US Virgin Islands 69% 28,800 104,400
5 Macau 66% 253,700 649,300
6 Maldives 60% 155,600 540,500
7 St. Kitts & Nevis 59% 14,100 53,200
8 British Virgin Islands 54% 5,500 30,200
9 Bahamas 52% 103,900 393,200
10 Anguilla 51% 3,800 15,000
11 St. Vincent & the Grenadines 45% 19,900 110,900
12 Seychelles 44% 20,600 98,300
13 Grenada 43% 24,300 112,500
14 Former Netherlands Antilles 41% 25,700 26,200
15 Belize 39% 64,800 397,600
16 Cape Verde 39% 98,300 556,000
17 Dominica 39% 13,600 72,000
18 Vanuatu 36% 29,000 307,100
19 Barbados 33% 44,900 287,400
20 Cayman Islands 33% 12,300 65,700
21 Jamaica 33% 406,100 2,961,000
22 Montenegro 33% 66,900 628,100
23 Georgia 28% 488,200 3,989,000
24 Cambodia 26% 2,371,100 16,719,000
25 Fiji 26% 90,700 896,400
26 Croatia 25% 383,400 4,105,000
27 Sao Tome and Principe 23% 14,500 219,200
28 Bermuda 23% 7,800 62,300
29 Iceland 22% 44,100 341,200
30 Thailand 21% 8,054,600 69,800,000
31 Malta 21% 52,800 441,500
32 New Zealand 20% 479,400 4,822,000
33 Lebanon 19% 434,200 6,825,000
34 Mauritius 19% 104,200 1,272,000
35 Portugal 19% 902,400 10,197,000
36 Gambia 18% 129,600 2,417,000
37 Jordan 18% 254,700 10,200,000
38 Dominican Republic 17% 810,800 10,848,000
39 Uruguay 16% 262,500 3,474,000
40 Namibia 15% 114,600 2,541,000

Croatia, another tourist hotspot, is hoping to reopen in time for peak season—the country generated tourism revenues of $13B in 2019. With a population of over 4 million, travel and tourism contributes to 25% of its workforce.

How the 20 Largest Economies Stack Up

Tourist-centric countries remain the hardest hit from global travel bans, but the world’s biggest economies are also feeling the impact.

In Spain, tourism ranks as the third highest contributor to its economy. If lockdowns remain in place until September, it is projected to lose $68 billion (€62 billion) in revenues.

Rank Country Travel and Tourism, Contribution to GDP
1 Mexico 15.5%
2 Spain 14.3%
3 Italy 13.0%
4 Turkey 11.3%
5 China 11.3%
6 Australia 10.8%
7 Saudi Arabia 9.5%
8 Germany 9.1%
9 United Kingdom 9.0%
10 U.S. 8.6%
11 France 8.5%
12 Brazil 7.7%
13 Switzerland 7.6%
14 Japan 7.0%
15 India 6.8%
16 Canada 6.3%
17 Netherlands 5.7%
18 Indonesia 5.7%
19 Russia 5.0%
20 South Korea 2.8%

On the other hand, South Korea is impacted the least: just 2.8% of its GDP is reliant on tourism.

Travel, Interrupted

Which countries earn the most from the travel and tourism industry in absolute dollar terms?

Topping the list was the U.S., with tourism contributing over $1.8 trillion to its economy, or 8.6% of its GDP in 2019. The U.S. remains a global epicenter for COVID-19 cases, and details remain unconfirmed if the country will reopen to visitors before summer.

Travel and tourism contribution to GDP in absolute terms

Meanwhile, the contribution of travel and tourism to China’s economy has more than doubled over the last decade, approaching $1.6 trillion. To help bolster economic activity, China and South Korea have eased restrictions by establishing a travel corridor.

As countries slowly reopen, other travel bubbles are beginning to make headway. For example, Estonia, Latvia, and Lithuania have eased travel restrictions by creating an established travel zone. Australia and New Zealand have a similar arrangement on the horizon. These travel bubbles allow citizens from each country to travel within a given zone.

Of course, COVID-19 will have a lasting impact on employment and global economic activity with inconceivable outcomes. When the dust finally settles, could global tourism face a reckoning?

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How U.S. Consumers are Spending Differently During COVID-19


This post is by Iman Ghosh from Visual Capitalist

In 2019, nearly 70% of U.S. GDP was driven by personal consumption.

However, in the first quarter of 2020, the COVID-19 pandemic has initiated a transformation of consumer spending trends as we know them.

Consumer Spending in Charts

By leveraging new data from analytics platform 1010Data, today’s infographic dives into the credit and debit card spending of five million U.S. consumers over the past few months.

Let’s see how their spending habits have evolved over that short timeframe:

How U.S. Consumers are Spending Differently During COVID-19

The above data on consumer spending, which comes from 1010Data and powered by AI platform Exabel, is broken into 18 different categories:

  • General Merchandise & Grocery: Big Box, Pharmacy, Wholesale Club, Grocery
  • Retail: Apparel, Office Supplies, Pet Supplies
  • Restaurant: Casual dining, Fast casual, Fast food, Fine dining
  • Food Delivery: Food delivery, Grocery Delivery, Meal/Snack kit
  • Travel: Airline, Car rental, Cruise, Hotel

It’s no surprise that COVID-19 has consumers cutting back on most of their purchases, but that doesn’t mean that specific categories don’t benefit from changes in consumer habits.

Consumer Spending Changes By Category

The onset of changing consumer behavior can be observed from February 25, 2020, when compared year-over-year (YoY).

As of May 12, 2020, combined spending in all categories dropped by almost 30% YoY. Here’s how that shakes out across the different categories, across two months.

General Merchandise & Grocery

This segment saw a sharp spike in initial spending, as Americans scrambled to stockpile on non-perishable food, hand sanitizer, and toilet paper from Big Box stores like Walmart, or Wholesale Clubs like Costco.

In particular, spending on groceries reached a YoY increase of 97.1% on March 18, 2020. However, these sudden panic-buying urges leveled out by the start of April.

  Feb 25, 2020 YoY Spending May 5, 2020 YoY Spending Overall Change
Big Box +14.2% -1.5% -15.7%
Grocery +1.0% +9.4% +8.4%
Pharmacy -3.6% -23.8% -20.2%
Wholesale Club +13.0% +2.6% -10.4%

Pharmaceutical purchases dropped the most in this segment, possibly as individuals cut back on their healthcare expenditures during this time. In fact, in an April 2020 McKinsey survey of physicians, 80% reported a decline in patient volumes.

Retail

With less foot traffic in malls and entire stores forced to close, sales of apparel plummeted both in physical locations and over e-commerce platforms.

  Feb 25, 2020 YoY Spending May 5, 2020 YoY Spending Overall Change
Apparel -5.6% -51.9% -46.3%
Office Supplies -8.9% -2.8% +6.1%
Pet Supplies +2.7% -18.5% -21.2%

Interestingly, sales of office supplies rose as many pivoted to working from home. Many parents also likely required more of these resources to home-school their children.

Restaurant

The food and beverage industry has been hard-hit by COVID-19. While many businesses turned to delivery services to stay afloat, those in fine dining were less able to rely on such a shift, and spiraled by 88.2% by May 5, 2020, year-over-year.

  Feb 25, 2020 YoY Spending May 5, 2020 YoY Change Overall Change
Casual Dining -2.7% -64.9% -62.2%
Fast Casual 4.2% -29.6% -33.8%
Fast Food 2.0% -20.9% -22.9%
Fine Dining -18.6% -88.2% -69.6%

Applebees or Olive Garden exemplify casual dining, while Panera or Chipotle characterize fast casual.

Food Delivery

Meanwhile, many consumers also shifted from eating out to home cooking. As a result, grocery delivery services jumped by over five-fold—with consumers spending a whopping 558.4% more at its April 19, 2020 peak compared to last year.

  Feb. 25, 2020 YoY Spending May 5, 2020 YoY Spending Overall Change
Food Delivery +18.8% +67.1% +48.3%
Grocery Delivery +23.0% +419.7% +396.7%
Meal/ Snack Kit +7.0% -5.9% -12.9%

Food delivery services are also in high demand, with Doordash seeing the highest growth in U.S. users than any other food delivery app in April.

Travel

While all travel categories experienced an immense decline, cruises suffered the worst blow by far, down by 87.0% in YoY spending since near the start of the pandemic.

  Feb 25, 2020 YoY Spending May 5, 2020 YoY Spending Overall Change
Airline -7.7% -99.1% -91.4%
Car Rental -6.3% -86.0% -79.7%
Cruise -18.7% -105.7% -87.0%
Hotel -7.0% -85.9% -78.9%

Airlines have also come to a halt, nosediving by 91.4% in a 10-week span. In fact, governments worldwide have pooled together nearly $85 billion in an attempt to bail the industry out.

Hope on the Horizon?

Consumer spending offers a pulse of the economy’s health. These sharp drops in consumer spending fall in line with the steep decline in consumer confidence.

In fact, consumer confidence has eroded even more intensely than the stock market’s performance this quarter, as observed when the Index of Consumer Sentiment (ICS) is compared to the S&P 500 Index.

Consumer Sentiment Index

Many investors dumped their stocks as the coronavirus hit, but consumers tightened their purse strings even more. Yet, as the chart also shows, both the stock market and consumer sentiment are slowly but surely on the mend since April.

As the stay-at-home curtain cautiously begins to lift in the U.S., there may yet be hope for economic recovery on the horizon.

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How Global Central Banks are Responding to COVID-19, in One Chart


This post is by Marcus Lu from Visual Capitalist

How Global Central Banks are Responding to COVID-19, in One Chart

How Global Central Banks are Responding to COVID-19

When times get tough, central banks typically act as the first line of defense.

However, modern economies are incredibly complex—and calamities like the 2008 financial crisis have already pushed traditional policy tools to their limits. In response, some central banks have turned to newer, more unconventional strategies such as quantitative easing and negative interest rates to do their work.

In response to the COVID-19 pandemic, central banks are once again taking decisive action. To help us understand what’s being done, today’s infographic uses data from the International Monetary Fund (IMF) to compare the policy responses of 29 systemically important economies.

The Central Bank Toolkit

To begin, here are brief descriptions of each policy, which the IMF sorts into four categories:

1. Monetary Policies

Policies designed to control the money supply and promote stable economic growth.

Policy Name Intended Effect
Policy rate cuts Stimulates economic activity by decreasing the cost of borrowing
Central bank liquidity support Provides distressed markets with additional liquidity, often in the form of loans
Central bank swap lines Agreements between the U.S. Fed and foreign central banks to enhance the provision of U.S. dollar liquidity
Central bank asset purchase schemes Uses newly-created currency to buy large quantities of financial assets, such as government bonds. This increases the money supply and decreases longer-term rates

2. External Policies

Policies designed to mitigate the effects of external economic shocks.

Policy Name Intended Effect
Foreign currency intervention Stabilizes the national currency by intervening in the foreign exchange market
Capital flow measures Restrictions, such as tariffs and volume limits, on the flow of foreign capital in and out of a country

3. Financial Policies for Banks

Policies designed to support the banking system in times of distress.

Policy Name Intended Effect
Easing of the countercyclical capital buffer A reduction in the amount of liquid assets required to protect banks against cyclical risks
Easing of systemic risk or domestic capital buffer A reduction in the amount of liquid assets required to protect banks against unforeseen risks
Use of capital buffers Allows banks to use their capital buffers to enhance relief measures
Use of liquidity buffers Allows banks to use their liquidity buffers to meet unexpected cash flow needs
Adjustments to loan loss provision requirements The level of provisions required to protect banks against borrower defaults are eased

4. Financial Policies for Borrowers

Policies designed to improve access to capital as well as provide relief for borrowers.

Policy Name Intended Effect
State loans or credit guarantees Ensures businesses of all sizes have adequate access to capital
Restructuring of loan terms or moratorium on payments Provides borrowers with financial assistance by altering terms or deferring payments

Putting Policies Into Practice

Let’s take a closer look at how these policy tools are being applied in the real world, particularly in the context of how central banks are battling the effects of the COVID-19 pandemic.

1. Monetary Policies

So far, many central banks have enacted expansionary monetary policies to boost slowing economies throughout the pandemic.

One widely used tool has been policy rate cuts, or cuts to interest rates. The theory behind rate cuts is relatively straightforward—a central bank places downward pressure on short-term interest rates, decreasing the overall cost of borrowing. This ideally stimulates business investment and consumer spending.

If short-term rates are already near zero, reducing them further may have little to no effect. For this reason, central banks have leaned on asset purchase schemes (quantitative easing) to place downward pressure on longer-term rates. This policy has been a cornerstone of the U.S. Federal Reserve’s (Fed) COVID-19 response, in which newly-created currency is used to buy hundreds of billions of dollars of assets such as government bonds.

When the media says the Fed is “printing money”, this is what they’re actually referring to.

2. External Policies

External policies were less relied upon by the systemically important central banks covered in today’s graphic.

That’s because foreign currency interventions, central bank operations designed to influence exchange rates, are typically used by developing economies only. This is likely due to the higher exchange rate volatility experienced by these types of economies.

For example, as investors flee emerging markets, Brazil has seen its exchange rate (BRL/USD) tumble 30% this year.

In an attempt to prevent further depreciation, the Central Bank of Brazil has used its foreign currency reserves to increase the supply of USD in the open market. These measures include purchases of $8.8B in USD-denominated Brazilian government bonds.

3. Financial Policies for Banks

Central banks are often tasked with regulating the commercial banking industry, meaning they have the authority to ease restrictions during economic crises.

One option is to ease the countercyclical capital buffer. During periods of economic growth (and increased lending), banks must accumulate reserves as a safety net for when the economy eventually contracts. Easing this restriction can allow them to increase their lending capacity.

Banks need to be in a position to continue financing households and corporates experiencing temporary difficulties.

—Andrea Enria, Chair of the ECB Supervisory Board

The European Central Bank (ECB) is a large proponent of these policies. In March, it also allowed its supervised banks to make use of their liquidity buffers—liquid assets held by a bank to protect against unexpected cash flow needs.

4. Financial Policies for Borrowers

Borrowers have also received significant support. In the U.S., government-sponsored mortgage companies Fannie Mae and Freddie Mac have announced several COVID-19 relief measures:

  • Deferred payments for 12 months
  • Late fees waived
  • Suspended foreclosures and evictions for 60 days

The U.S. Fed has also created a number of facilities to support the flow of credit, including:

  • Primary Market Corporate Credit Facility: Purchasing bonds directly from highly-rated corporations to help them sustain their operations.
  • Main Street Lending: Purchasing new or expanded loans from small and mid-sized businesses. Businesses with up to 15,000 employees or up to $5B in annual revenue are eligible.
  • Municipal Liquidity Facility: Purchasing short-term debt directly from state and municipal governments. Counties with at least 500,000 residents and cities with at least 250,000 residents are eligible.

Longer-term Implications

Central bank responses to COVID-19 have been wide-reaching, to say the least. Yet, some of these policies come at the cost of burgeoning debt-levels, and critics are alarmed.

In Europe, the ECB has come under scrutiny for its asset purchases since 2015. A ruling from Germany’s highest court labeled the program illegal, claiming it disadvantages German taxpayers (Germany makes larger contributions to the ECB than other member states). This ruling is not concerned with pandemic-related asset purchases, but it does present implications for future use.

The U.S. Fed, which runs a similar program, has seen its balance sheet swell to nearly $7 trillion since the outbreak. Implications include a growing reliance on the Fed to fund government programs, and the high difficulty associated with safely reducing these holdings.

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Zoom is Now Worth More Than the World’s 7 Biggest Airlines


This post is by Iman Ghosh from Visual Capitalist

Zoom Is Now Worth More Than The World's 7 Biggest Airlines

Zoom Is Now Worth More Than The 7 Biggest Airlines

Amid the COVID-19 pandemic, many people have transitioned to working—and socializing—from home. If these trends become the new normal, certain companies may be in for a big payoff.

Popular video conferencing company, Zoom Communications, is a prime example of an organization benefiting from this transition. However, other industries haven’t been so lucky.

The Zoom Boom, in Perspective

As of May 15, 2020, Zoom’s market capitalization has skyrocketed to $48.8 billion, despite posting revenues of only $623 million over the past year.

What separates Zoom from its competition, and what’s led to the app’s massive surge in mainstream business culture?

zoom-search-interest

Industry analysts say that business users have been drawn to the app because of its easy-to-use interface and user experience, as well as the ability to support up to 100 participants at a time. The app has also blown up among educators for use in online learning, after CEO Eric Yuan took extra steps to ensure K-12 schools could use the platform for free.

Zoom daily users have skyrocketed in past months, going from 10 million in December 2019 to a whopping 300 million as of April 2020.

Zoom vs. Airlines stock chart

The Airline Decline

The airline industry has been on the opposite end of fortune, suffering an unprecedented plummet in demand as international restrictions have shuttered airports:

The world’s top airlines by revenue have fallen in total value by 62% since the end of January:

Airline Market Cap Jan 31, 2020  Market Cap May 15, 2020
Southwest Airlines $28.440B $14.04B
Delta $35.680B $12.30B
United $18.790B $5.867B
International Airlines Group $14.760B $4.111B
Lufthansa $7.460B $3.873B
American $11.490B $3.886B
Air France $4.681B $2.137B
Total Market Cap $121.301B $46.214B

Source: YCharts. All market capitalizations listed as of May 15, 2020.

With countries scrambling to contain the spread of COVID-19, many airlines have cut travel capacity, laid off workers, and chopped executive pay to try and stay afloat.

If and when regular air travel will return remains a major question mark, and even patient investors such as Warren Buffett have pulled out from airline stocks.

Airline % Change in Total Returns (Jan 31-May 15, 2020)
United -72.91%
International Airlines Group -72.16%
American -65.76%
Delta -65.39%
Air France -54.34%
Southwest Airlines -56.35%
Lufthansa -48.08%

Source: YCharts, as of May 15, 2020.

The world has changed for the airlines. The future is much less clear to me about how the business will turn out.

—Warren Buffett

What Does the Future Hold?

Zoom’s recent success is a product of its circumstances, but will it last? That’s a question on the mind of many investors and pundits ahead of the company’s Q1 results to be released in June.

It hasn’t been all smooth-sailing for the company—a spate of “Zoom Bombing” incidents, where uninvited people hijacked meetings, brought the app’s security measures under scrutiny. However, the company remained resilient, swiftly providing support to combat the problem.

Meanwhile, as many parts of the world begin taking measures to restart economic activity, airlines could see a cautious return to the skies—although any such recovery will surely be a “slow, long ascent”.

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The post Zoom is Now Worth More Than the World’s 7 Biggest Airlines appeared first on Visual Capitalist.

How COVID-19 Consumer Spending is Impacting Industries


This post is by Katie Jones from Visual Capitalist

Consumer spending impact on industry

How COVID-19 Consumer Spending is Impacting Industries

Consumer spending is one of the most important driving forces for global economic growth.

Beyond impacting some of the factors that determine consumer spend—such as consumer confidence, unemployment levels, or the cost of living—the COVID-19 pandemic has also drastically altered how and where consumers choose to spend their hard-earned cash.

Today’s graphic pulls data from a global survey by McKinsey & Company that analyzes how consumers are reining in their spending, causing upheaval across every industry imaginable.

While some industries are in a better position to weather the impact of this storm, others could struggle to survive.

The Link Between Sentiment and Intent to Spend

As consumers grapple with uncertainty, their buying behavior becomes more erratic. What is clear however, is that they have reduced spending on all non-essential products and services.

But as each country moves along the COVID-19 curve, we can see a glimmer of increasing optimism levels, which in turn is linked to higher spending.

consumer spending optimism

India’s consumers, for example, are displaying higher levels of optimism, with more households planning to increase spend—a trend that is also evident in China, Indonesia, and Nigeria.

Meanwhile, American consumers are still more optimistic about the future than Europeans. 37% of Americans believe the country will recover in 2 or 3 months—albeit with optimism levels at the highest for people who earn over $100K.

Strategic Consumer Spending

Globally, consumers continue to spend—and in some cases, spend more compared to pre-pandemic levels—on some necessities such as groceries and household supplies.

Due to changes in media consumption habits, consumers in almost all countries surveyed say they will increase their spend on at-home entertainment. This is especially true for Korea, a country that already boasts a massive gaming culture.

As restrictions in China lift, many categories such as gasoline, wellness, and pet-care services appear to be bouncing back, which could be a positive sign for other countries following a similar trajectory. But while consumers amp up their spending on the things they need, they also anticipate spending less in other categories.

The Industries in the Red

Categories showing an alarming decline include restaurants and out-of-home entertainment.

However, there are two particularly hard-hit industries worth noting that are showing declines across every category and country:

Travel and Transport

The inevitable decline in the travel and transportation industry is a reflection of mass social isolation levels and tightening travel restrictions.

In fact, the U.S. travel industry can expect to see an average decline in revenue of 81% for April and May. Throughout 2020, losses will equate to roughly $519 billion—translating to a broader $1.2 trillion contraction in total economic impact.

consumer spending travel industry

According to the World Travel and Tourism Council, a staggering 50 million jobs are at risk in the industry, with 30 million of those jobs belonging to employees in Asia.

Considering the travel and tourism industry accounts for 10.4% of global GDP, a slow recovery could have serious ramifications.

Apparel

Apparel is experiencing a similarly worrying slowdown, with consumption 40-50% lower in China compared to pre-pandemic levels. Both online and offline sales for businesses the world over are also taking a major hit.

As consumers hold back on their spending, clothing brands of all shapes and sizes are forced to scale back production, and reimagine how they position themselves.

“It’s an unprecedented interruption of an industry that has relied on speeding from one season’s sales to the next. And it is bringing with it a new sense of connectedness, responsibility and empathy.”

—Tamsin Blanchard, The Guardian

Towards an Uncertain Future

Clearly the force majeure that is COVID-19 has not impacted every industry equally.

For some, rebuilding their customer experience by appealing to changing values could result in a profitable, and perhaps much-needed revival. For other companies, there is no other choice but to play the waiting game.

Regardless, every industry faces one universal truth: life after the pandemic will look significantly different.

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How Oil Prices Went Subzero: Explaining the COVID-19 Oil Crash


This post is by Jeff Desjardins from Visual Capitalist

How Oil Prices Went Subzero: Explaining the COVID-19 Oil Crash

Explaining the Historic COVID-19 Oil Price Crash

The Great Lockdown continues to turn markets on their head.

Last week, we dug into the unprecedented number of initial jobless claims coming out of the United States, which topped 22 million in a period of four weeks.

It’s just days later, and we already have our next market abnormality: this time, traders were baffled by West Texas Intermediate (WTI) crude — the U.S. benchmark oil price — which somehow flipped negative for the first time in history.

How is that possible? And how does it tie into the COVID-19 oil price crash in general?

Setting the Geopolitical Stage

Oil is a geopolitical game, and big price swings always come with a geopolitical undercurrent.

This particular story picked up steam in February as OPEC+ producers tried to negotiate a production cut, amid concerns that COVID-19 could impact demand. Russia walked out on these meetings, and Saudi Arabia responded by undercutting oil prices by $6-8 per barrel.

The world went into lockdown, energy demand dissipated, and oil producers continued to pump at will. Then on April 9th, nearly a full month after COVID-19 was declared a pandemic, Russia and Saudi Arabia finally settled their differences.

However, this truce came too late — prices had already fell about 60% from February highs.

How Prices Went Subzero

Up until recently, this was a fairly run-of-the-mill oil price crash — but then prices suddenly sunk below zero, with May futures for WTI oil closing at -$37.63 on April 20th.

For the first time in history, producers were willing to pay traders to take oil off their hands. This oddity is partially a function of the particularities of futures contracts:

  • Buyers Wanted (At Any Cost!)
    Futures contracts normally rollover to the next month without much happening, but in this case traders saw the May contract as a “hot potato”. No one wanted to be stuck taking delivery of oil when the world is awash in it and the country is in lockdown.
  • A Time and a Place
    Oil futures contracts specify a time and place for delivery. For WTI oil, that specific place is Cushing, Oklahoma. With most storage capacity booked already, taking physical delivery wasn’t even an option for many players.

In other words, sellers outnumbered buyers by a crazy margin — and because oil is a physical commodity, someone has to ultimately take the contract.

At time of publishing, the May contract and spot prices have “rebounded” to about $10. The June contract is slightly higher, at $13.

“Never before has the oil industry come this close to testing its logistics capacity to the limit.”

– International Energy Agency (IEA), Oil Market Report for April

Overcoming the Supply Glut

What do you do when oil is practically free?

You store as much of it as you can, and hope that at some point you can sell it for more.

Unfortunately, everyone has the exact same idea, and as a result there is a historic glut that is filling up the world’s storage capacity both on land and at sea:

  • In March, it was estimated that 76% of the world’s available oil storage capacity was already full.
  • A record-setting 160 million barrels of oil is being stored on tankers at sea, according to Reuters.
  • The cost of renting an oil supertanker has gone through the roof. It’s jumped from $20,000 per day to $200,000-$300,000 per day, according to Rystad Energy.

It remains to be seen how fast the transportation industry will recover in a post-COVID-19 world, but for now the outlook for all oil producers is grim. The continued fallout will not only affect industry, but also the countries that rely on oil exports to balance their budgets.

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Navigating Uncertainty: Leadership Accountability in Times of Crisis


This post is by Katie Jones from Visual Capitalist

In the face of adversity, leaders may struggle to manage their teams effectively.

Before the COVID-19 outbreak, over half of all professionals globally worked remotely at least 2.5 days a week. This has since increased dramatically, with 88% of organizations now insisting their employees work from home and implement social distancing.

Leaders must adapt to a more flexible workplace and create a culture of accountability so that their organization can successfully weather the COVID-19 storm.

Leadership Accountability in Uncertain Times

Today’s infographic, from bestselling author Vince Molinaro, reveals the five behaviors that leaders can adopt in order to provide thoughtful navigation through uncertainty.

leadership accountability in times of crisis

>> Join Vince Molinaro’s Community of Accountable Leaders

The Impact of Leadership Accountability

As the workforce pivots to remote working arrangements, the benefits of flexible working policies are coming into sharper focus.

Research shows that these policies can lower overhead costs, reduce commuting times and increase employee satisfaction—in addition to attracting top talent. Moreover, the shift to working remotely could boost the U.S. economy by $4.5 trillion annually by 2030.

But achieving these benefits requires accountability from everyone in an organization, and in an increasingly virtual world, that can become difficult to manage.

Challenges Facing Leaders Today

Leaders are already subject to an array of challenges that they must overcome, such as:

  • The pressure to differentiate: Leaders feel an unrelenting pressure to innovate and help their organizations stand out in a sea of ruthless competitors.
  • Executing the strategy: Leaders must align the organization to ensure employees are clear about what needs to get done to execute priorities seamlessly.
  • Leading transformational change: With so many moving parts, constant change across several aspects of a business can be difficult for leaders to manage.
  • Creating enduring value: Customers, boards, and shareholders have high expectations for leaders in exchange for their loyalty.
  • Building future talent: Leaders must build and nurture the next generation of leaders in addition to managing the day-to-day.

These mounting pressures can have a detrimental impact on a business leader’s performance, so it is crucial that they get the support they need now, more than ever.

The Characteristics of Accountable Leaders

Truly accountable leadership is the only way an organization can weather uncertainty in a world that has been upended. Research reveals that among the strongest performing companies, accountable leaders consistently demonstrate five behaviors that set them apart from others.

  1. Hold others accountable for high standards of performance
    Good leaders make mutual expectations clear by consistently reinforcing what is important, and what employees should prioritize in their roles.
  2. Tackle tough issues and make difficult decisions
    Technology is hugely beneficial, but it should never replace the human element. Picking up the phone or having a Skype call is more immediate and personal, especially when it comes to problem solving and making tough decisions.
  3. Communicate the strategy across the organization
    Leaders must ensure that employees have complete clarity in terms of the company’s vision to do their jobs effectively. Creating a set of well-defined goals can help people stay engaged and decrease their stress levels.
  4. Express optimism about the company and its future
    Many employees can feel isolated and disconnected in the virtual world, so leaders must provide support, positive energy, and a sense of hope for the future.
  5. Display clarity about external trends in the business environment
    Finally, it is critical to help employees make sense of the current situation right now. Leaders must provide honest and transparent communication in a way that manages fear, stress, and anxiety. This encourages employees’s determination to help the organization succeed.

Leading The Future

As we embrace the unknown, it is clear that leadership accountability will become more important than ever.

In fact, it has become a crucial element for future-proofing organizations in times of crisis or drastic change. Perhaps more importantly, it is necessary for encouraging teams to emerge more connected and resilient than ever before.

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These Charts Put the Historic U.S. Job Losses in Perspective


This post is by Jeff Desjardins from Visual Capitalist

These Charts Put the Historic U.S. Job Losses in Perspective

When recessions hit, it’s not unusual to see millions of jobs lost.

Such episodes are a regular part of the business cycle and when they occur, most businesses do their best to tough things out. Then, as time progresses, it gradually becomes clear that spending must be curtailed, budget cuts must be made, and workers must unfortunately be sent home.

This economic process normally takes months, or even years, to unwind.

But, the COVID-19 pandemic has thrown a wrench into the economic status quo, creating a situation that is incomparable to any previous downturn. Instead of a gradual economic transition to slower growth prospects, business operations have suddenly screeched to a halt with no clear window to resume.

Beyond Comparison

The Great Lockdown of the economy has been completely unprecedented, both in terms of the speed of the shutdown and its impact on jobs.

As a result, the statistics being released are completely surreal. Perhaps the best example of this is number for initial jobless claims in the U.S., which tops 22 million over the last four weeks.

Worst U.S. Job Losses on Record (Four Week Period)

Year Description Peak Jobless claims (4-wk total) % of U.S. Population
1975 Stagflation 2.24 million 1.0%
1980 Fed tightening (Volcker) 2.52 million 1.1%
1982 Double-dip recession 2.70 million 1.2%
1991 Early 1990s recession 2.00 million 0.8%
2001 Dotcom Bust 1.96 million 0.7%
2009 Great Recession 2.64 million 0.9%
2020 The Great Lockdown 22.03 million 6.7%

Source: FT

As you can see above, the number is 10x higher than many of the worst four-week job losses on record, so historical comparisons don’t come close.

In other words, if you were using recent recessions as a potential barometer of how bad things could get for jobless claims, the numbers coming from COVID-19 crisis just blew up your model.

The Recession Time Machine

To get further context on the numbers above, it’s worth jumping in a time machine to revisit what happened to job numbers in previous recessions:

  • Stagflation and Oil Shocks (1973-75)
    This recession put an end to the Post WWII global economic expansion, and was characterized by the 1973 oil embargo, the aftermath of the Nixon Shock, and the collapse of the Bretton Woods system of international finance. Unemployment and inflation were both high (stagflation), and the unemployment rate in the U.S. reached 9.0% in May 1975.
  • The Double-Dip Recession (1980, 1981-1982)
    This “W-shaped” recession saw economic contraction first in 1980, only to return again in 1981. This corresponded with the Iranian Revolution, as well as Fed chair Paul Volcker’s aggressive policy to rein in inflation with high interest rates. Unemployment peaked at 10.8% in 1982 — the highest rate seen since the Great Depression.
  • The Great Recession (2009)
    The most recent recession in memory peaked with 10.0% in unemployment in October 2009. It took until 2016 for unemployment to fall back to pre-recession levels.

Finally, it’s worth noting that during the Great Depression (1929-1933), unemployment reached a historic high of 24.9%. To get to a comparable equivalent in modern times, there would need to be 41 million Americans out of work permanently.

Room for Optimism

Although the initial jobless claims are staggering and clearly without modern precedent, there is a case to be made for cautious optimism.

Many of the aforementioned recessions took months or years to culminate, with peak job losses occurring at the tail end of each recession. The current crisis, now being called “The Great Lockdown”, caused many businesses to shut doors suddenly and against their will. It also corresponded with unexpected closures of national borders and the halting of regular trade activity around the world.

When and if normal economic activity resumes, it’ll be interesting to see how much of the damage is temporary.

Editor’s note: While we show the figure for peak unemployment during the Great Depression in both the chart and article, there is no comparable number available for weekly jobless claims. According to Federal Reserve data, it would seem that the weekly data set on initial jobless claims started in the 1960s.

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The post These Charts Put the Historic U.S. Job Losses in Perspective appeared first on Visual Capitalist.

Uncovering Income: Dividend Stocks With Strong Yields


This post is by Jenna Ross from Visual Capitalist

Dividend Stocks

Uncovering Income: Dividend Stocks with Strong Yields

Amid the current market volatility, attractive income-generating investments can be hard to find.

Treasury bond yields hover near record lows, and U.S. companies face restrictions on issuing dividends if they accept COVID-19 stimulus funds. Moreover, Goldman Sachs estimates dividends for S&P 500 stocks will decline by 25% this year.

Which stocks can investors turn to for stable distributions and relatively high dividend yields? Today’s visualization shows 35 stocks that may meet this criteria, leveraging Goldman Sachs data as published by Forbes.

The Dividend Stocks to Watch

To compile the list, Goldman Sachs identified stocks from the Russell 1000 index that met a number of requirements:

  • A minimum annualized dividend yield of 3%
  • An S&P credit rating of at least BBB+
  • Ample cash on hand
  • Strong balance sheets
  • ”Reasonable” payout ratios
  • At least average performance since the market peak

Dividend yields, which measure dividend income in relation to the share price, were initially calculated March 27. We have updated them as of market close on April 8. Here’s the full breakdown, sorted from highest to lowest dividend yield:

Rank Company Ticker Annual Dividend Yield Sector
1 CenterPoint Energy, Inc. NYSE: CNP 6.90% Utilities
2 Wells Fargo & Company NYSE: WFC 6.74% Financials
3 People’s United Financial, Inc. NASDAQGS: PBCT 6.34% Financials
4 Franklin Resources, Inc. NYSE: BEN 6.28% Financials
5 Regency Centers NASDAQGS: REG 5.82% Real estate
6 Truist Financial NYSE: TFC 5.50% Financials
7 International Business Machines NYSE: IBM 5.43% Tech
8 Omnicom Group Inc. NYSE: OMC 4.76% Communication services
9 U.S. Bancorp NYSE: USB 4.71% Financials
10 Raytheon Technologies (merger of Raytheon and United Tech.) NYSE: RTX 4.69% Industrials
11 NetApp, Inc. NASDAQGS: NTAP 4.69% Information Technology
12 The PNC Financial Services Group, Inc. NYSE: PNC 4.62% Financials
13 Eaton Vance Corp. NYSE: EV 4.34% Financials
14 Nucor Corporation NYSE: NUE 4.12% Materials
15 United Parcel Service, Inc. NYSE: UPS 4.09% Industrials
16 M&T Bank Corporation NYSE: MTB 4.09% Financials
17 Exelon Corporation NASDAQGS: EXC 4.07% Utilities
18 Archer-Daniels-Midland Company NYSE: ADM 3.95% Consumer staples
19 3M Company NYSE: MMM 3.95% Industrials
20 Emerson Electric Co. NYSE: EMR 3.84% Industrials
21 Sysco Corp. NYSE: SYY 3.81% Consumer staples
22 Mid-America Apartment Communities NYSE: MAA 3.61% Real Estate
23 Essex Property Trust, Inc. NYSE: ESS 3.55% Real Estate
24 MDU Resources Group NYSE: MDU 3.53% Utilities
25 Cummins Inc. NYSE: CMI 3.51% Industrials
26 Sonoco Products Co. NYSE: SON 3.50% Materials
27 Cisco Systems, Inc. NASDAQGS: CSCO 3.45% Information Technology
28 American Electric Power Company, Inc. NYSE: AEP 3.36% Utilities
29 The Hartford Financial Services Group, Inc. NYSE: HIG 3.36% Financials
30 NiSource Inc. NYSE: NI 3.30% Utilities
31 Caterpillar Inc. NYSE: CAT 3.23% Industrials
32 Everest Re Group, Ltd. NYSE: RE 3.13% Financials
33 Bristol-Myers Squibb Company NYSE: BMY 3.09% Health care, pharmaceuticals
34 The Home Depot, Inc. NYSE: HD 3.08% Consumer discretionary
35 Bank of America Corporation NYSE: BAC 3.07% Financials

Note: From the original list, 5 stocks have been excluded as they no longer meet the 3% annualized yield threshold.

Centerpoint Energy, an electric and natural gas utility company, is at the top of the list. Since utility stocks are generally considered to be recession-resistant, investors may benefit from both the company’s yield and its defensive qualities.

Financials are the most-represented sector, with 11 companies on the list. Although regulators have pressured European banks to suspend dividend payments, U.S. banks will likely be able to continue their distributions. Top banking executives have argued they have sufficient capital to weather the COVID-19 crisis, and that halting payments would be “destabilizing to investors.”

There are also a number of well-known names on the list, including Home Depot, IBM, and 3M. The latter is the largest maker of respirator masks worldwide, and has been providing critical supplies to the U.S., Canada, and Latin America.

Caution: Volatility Ahead

As the pandemic’s financial impact continues, it’s likely many companies will delay or suspend their dividends. To avoid falling into “yield traps”—a trap in which an attractive yield could be due to a fundamental business problem—investors can screen for the qualities laid out above.

A strong balance sheet, good credit rating, and average or better performance since the downturn can all help point towards stability.

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The post Uncovering Income: Dividend Stocks With Strong Yields appeared first on Visual Capitalist.

The Pandemic Economy: What are Shoppers Buying Online During COVID-19?


This post is by Katie Jones from Visual Capitalist

Ecommerce category growth during covid-19 pandemic

The Fastest Growing and Declining E-Commerce Categories

The COVID-19 pandemic is having a significant impact on every aspect of life, including how people shop for their necessities, and their not-so-necessities.

With online retail sales estimated to reach an eye-watering $6.5 trillion by 2023, the ecommerce sector was already booming. But since the outbreak, online shopping has been catapulted into complete overdrive. Even the largest retailers on the planet are struggling to keep up with the unprecedented consumer demand—but what exactly are people buying?

To answer this question, retail intelligence firm Stackline analyzed ecommerce sales across the U.S. and compiled a list of the fastest growing and declining ecommerce categories (March 2020 vs. March 2019) with surprising results.

The Frenzy of Buyer Behavior

As people come to terms with their new living situations, their buying behavior has adapted to suit their needs. While panic buying may have slowed in some countries, consumers continue to stock up on supplies, or “pandemic pantry products”.

Many consumers are also using their newfound time to focus on their health, with 85% of consumers taking up some kind of exercise while in social isolation, and 40% of them saying they intend to keep it up when restrictions are lifted.

These changing behaviors have resulted in a number of product categories experiencing a surge in demand — and although a lot of them are practical, others are wonderfully weird.

The Fastest Growing Categories

While the below list features several shelf-stable items, it seems as though consumers are taking matters into their own hands, with bread making machines sitting in second place and retailers selling out of their top models.

It’s clear from the list that consumers are considering positive changes to their lifestyle while in isolation, as fitness, smoking cessation, and respiratory categories are all experiencing growth.

Explore the 100 fastest growing product categories below:

Rank Category % Change in March (2020 vs. 2019)
#1 Disposable Gloves 670%
#2 Bread Machines 652%
#3 Cough & Cold 535%
#4 Soups 397%
#5 Dried Grains & Rice 386%
#6 Packaged Foods 377%
#7 Fruit Cups 326%
#8 Weight Training 307%
#9 Milk & Cream 279%
#10 Dishwashing Supplies 275%
#11 Paper Towels 264%
#12 Hand Soap & Sanitizer 262%
#13 Pasta 249%
#14 Vegetables 238%
#15 Flour 238%
#16 Facial Tissues 235%
#17 Allergy Medicine 232%
#18 Women’s Health 215%
#19 Cereals 214%
#20 Power Generators 210%
#21 Laundry Supplies 200%
#22 Household Cleaners 195%
#23 Soap & Body Wash 194%
#24 Toilet Paper 190%
#25 Jerky & Dried Meats 187%
#26 Chips & Pretzels 186%
#27 Crackers 184%
#28 Health Monitors 182%
#29 Popcorn 179%
#30 Computer Monitors 172%
#31 Fitness Equipment 170%
#32 Single Vitamins 166%
#33 Nut & Seed Butters 163%
#34 Cat Food 162%
#35 Fruit Snacks 162%
#36 Baby Care Products 162%
#37 Refrigerators 160%
#38 Baking Mixes 160%
#39 Toilet Accessories 160%
#40 Dog Food 159%
#41 Diapers 154%
#42 Yoga Equipment 154%
#43 Bottled Beverages 153%
#44 Baby Meals 153%
#45 Cookies 147%
#46 Digestion & Nausea 144%
#47 Snack Foods 141%
#48 Herbal Supplements 136%
#49 Cooking Oils 135%
#50 Water 130%
#51 Incontinence & Tummy 129%
#52 Mutivitamin 126%
#53 Cat Litter 125%
#54 Training Pads and Trays 125%
#55 Juices 125%
#56 Smoking Cessation 122%
#57 Dried Fruit & Raisins 120%
#58 Salt & Pepper Seasoning 118%
#59 Craft Kits & Projects 117%
#60 Batteries 116%
#61 Trash Bags 116%
#62 Nuts & Seeds 116%
#63 Hair Coloring 115%
#64 Sauce & Gravy 115%
#65 Deli Foods 114%
#66 Syrups 114%
#67 Breads & Bakery 114%
#68 Minerals 113%
#69 Condiments 111%
#70 First Aid 108%
#71 Nail Care 108%
#72 Humidifiers 105%
#73 Art Paint 104%
#74 Office Chairs 104%
#75 Deodorant 103%
#76 Jams, Jellies & Spreads 102%
#77 Coffee 101%
#78 Spices & Seasoning 100%
#79 Skin Care 99%
#80 Pain Relievers 99%
#81 Cooking Vinegars 98%
#82 Air Purifiers 97%
#83 Granola & Nutrition Bars 97%
#84 Pudding & Gelatin 97%
#85 Toy Clay & Dough 95%
#86 Single Spices 95%
#87 Bird Food & Treats 91%
#88 Lab & Science Products 90%
#89 Eczema & Psoriasis 90%
#90 Ping Pong 89%
#91 Chocolate 86%
#92 Baking Ingredients 84%
#93 Energy Supplements 84%
#94 Respiratory 82%
#95 Office Desks 82%
#96 Potty Training Supplies 82%
#97 Herbs, Spices & Seasonings 82%
#98 Keyboard & Mice 80%
#99 Body Lotion 79%
#100 Safes 69%

Interestingly, toilet paper has seen more growth than baby care products, and cured meats have seen more growth than water. But while some categories are experiencing a drastic increase in demand, others are slumping in the pandemic economy.

The Fastest Declining Categories

An unprecedented wave of event and vacation cancellations is having a huge impact on the products people consume. For instance, luggage and suitcases, cameras, and men’s swimwear have all seen a dip in sales.

See the full list of 100 fastest declining categories below:

Rank Category % Change in March (2020 vs. 2019)
#1 Luggage & Suitcases -77%
#2 Briefcases -77%
#3 Cameras -64%
#4 Men’s Swimwear -64%
#5 Bridal Clothing -63%
#6 Men’s Formal Wear -62%
#7 Women’s Swimwear -59%
#8 Rash Guards -59%
#9 Boy’s Athletic Shoes -59%
#10 Gym Bags -57%
#11 Backpacks -56%
#12 Snorkelling Equipment -56%
#13 Girl’s Swimwear -55%
#14 Baseball Equipment -55%
#15 Event & Party Supplies -55%
#16 Motorcycle Protective Gear -55%
#17 Camera Bags & Cases -54%
#18 Women’s Suits & Dresses -53%
#19 Women’s Boots -51%
#20 Cargo Racks -51%
#21 Women’s Sandals -50%
#22 Drones -50%
#23 Boy’s Active Clothing -50%
#24 Lunch Boxes -50%
#25 Store Fixtures & Displays -50%
#26 Automotive Mats -50%
#27 Men’s Outerwear -49%
#28 Watches & Accessories -49%
#29 Cargo Bed Covers -48%
#30 Track & Field Equipment -48%
#31 Ceiling Lighting -47%
#32 Camera Lenses -47%
#33 Girl’s Coats and Jackets -47%
#34 Women’s Hats & Caps -47%
#35 Women’s Outerwear -47%
#36 Video Cameras -46%
#37 Wheels & Tires -46%
#38 Motorcycle Parts -45%
#39 Women’s Wallets -45%
#40 Shocks & Struts -44%
#41 Transmission & Parts -44%
#42 Girl’s Athletic Shoes -44%
#43 Women’s Shoes -44%
#44 Telescopes -44%
#45 Sunglasses & Eyeglasses -43%
#46 Men’s Tops -41%
#47 Video Projectors -40%
#48 Men’s Athletic Shoes -40%
#49 Marine Electronics -40%
#50 Hand Tools -40%
#51 Wine Racks -40%
#52 Men’s Shoes -40%
#53 Clocks -39%
#54 Baby Girl’s Shoes -39%
#55 Bracelets -39%
#56 Men’s Boots -39%
#57 Tapestries -39%
#58 Camping Equipment -39%
#59 Men’s Bottoms -38%
#60 Cell Phones -38%
#61 Tool Storage & Organizers -38%
#62 Necklaces -38%
#63 Swimming Equipment -37%
#64 Men’s Hats & Caps -37%
#65 Girl’s Shoes -37%
#66 Industrial Tools -36%
#67 Juicers -36%
#68 Desktops -35%
#69 Classroom Furniture -35%
#70 Bar & Wine Tools -35%
#71 Glassware & Drinkware -35%
#72 Musical Instruments -34%
#73 Power Winches -34%
#74 Home Bar Furniture -34%
#75 Office Storage Supplies -34%
#76 Girl’s Active Clothing -34%
#77 Women’s Tops -34%
#78 Braces, Splints & Supports -34%
#79 Car Anti-theft -34%
#80 Rings -34%
#81 Blankets & Quilts -33%
#82 Women’s Athletic Shoes -33%
#83 Kitchen Sinks -33%
#84 Golf Clubs -33%
#85 Equestrian Equipment -33%
#86 GPS & Navigation -32%
#87 Recording Supplies -32%
#88 Home Audio -32%
#89 Boy’s Accessories -32%
#90 Earrings -32%
#91 Dining Sets -31%
#92 Calculators -31%
#93 Boy’s Shoes -31%
#94 Volleyball Equipment -31%
#95 Strollers -31%
#96 Coolers -30%
#97 Sanders & Grinders -30%
#98 Men’s Activewear -29%
#99 Living Room Furniture -29%
#100 Climbing & Hiking Bags -28%

Regardless of which list a product falls under, it is clear that the pandemic has impacted retailers of every kind in both positive and negative ways.

The New Normal?

Officially the world’s largest retailer, Amazon has announced it can no longer keep up with consumer demand. As a result, it will be delaying the delivery of non-essential items, or in some cases not taking orders for non-essentials at all.

This presents a double-edged sword, as the new dynamic that is bringing some retailers unprecedented demand could also bring about an untimely end for others.

Meanwhile, the question remains: will this drastic change in consumer behavior stabilize once we flatten the curve, or is this our new normal?

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The post The Pandemic Economy: What are Shoppers Buying Online During COVID-19? appeared first on Visual Capitalist.

The Anatomy of the $2 Trillion COVID-19 Stimulus Bill


This post is by Nick Routley from Visual Capitalist

Anatomy of CARES Act covid-19 stimulus package

The Anatomy of the $2 Trillion COVID-19 Stimulus Bill

The unprecedented response to the COVID-19 pandemic has prioritized keeping people apart to slow the spread of the virus. While measures such as business closures and travel restrictions are effective at fighting a pandemic, they also have a dramatic impact on the economy.

To help right the ship, the Coronavirus Aid, Relief, and Economic Security Act — also known as the CARES Act — was passed by U.S. lawmakers last week with little fanfare. The act became the largest economic stimulus bill in modern history, more than doubling the stimulus act passed in 2009 during the Financial Crisis.

Today’s Sankey diagram is a visual representation of where the $2 trillion will be spent. Broadly speaking, there are five components to the COVID-19 stimulus bill:

Category Total Amount Share of the Package
Individuals / Families $603.7 billion 30%
Big Business $500.0 billion 25%
Small Business $377.0 billion 19%
State and Local Government $340.0 billion 17%
Public Services $179.5 billion 9%

Although the COVID-19 stimulus bill is incredibly complex, here are some of the most important parts to be aware of.

Funds for Individuals

Amount: $603.7 billion – 30% of total CARES Act

In order to stimulate the sputtering economy quickly, the U.S. government will deploy “helicopter money” — direct cash payments to individuals and families.

The centerpiece of this plan is a $1,200 direct payment for those earning up to $75,000 per year. For higher earners, payment amounts will phase out, ending altogether at the $99,000 income level. Families will also receive $500 per child.

There are three other key things to know about this portion of the stimulus funds:

  1. There will be a temporary suspension for any student loan held by the federal government. This means no payments required and no interest accrued until the end of September, 2020.
  2. Borrowers with federally backed loans can request forbearance on mortgage payments for up to six months.
  3. There will be an expansion of unemployment benefits, including a four-month enhancement of benefits. This plan includes freelancers, workers in the gig economy, and furloughed employees.

Big Business

Amount: $500.0 billion – 25% of total CARES Act

This component of the package is aimed at stabilizing big businesses in hard-hit sectors.

The most obvious industry to receive support will be the airlines. About $58 billion has been earmarked for commercial and cargo airlines, as well as airline contractors. Perhaps in response to recent criticism of the industry, companies receiving stimulus money will be barred from engaging in stock buybacks for the term of the loan plus one year.

One interesting pathway highlighted by today’s Sankey diagram is the $17 billion allocated to “maintaining national security”. While this provision doesn’t mention any specific company by name, the primary recipient is believed to be Boeing.

The bill also indicates that an inspector general will oversee the recovery process, along with a special committee.

Small Business

Amount: $377.0 billion – 19% of total CARES Act

To ease the strain on businesses around the country, the Small Business Administration (SBA) will be given $350 billion to provide loans of up to $10 million to qualifying organizations. These funds can be used for mission critical activities, such as paying rent or keeping employees on the payroll during COVID-19 closures.

As well, the bill sets aside $10 billion in grants for small businesses that need help covering short-term operating costs.

State and Local Governments

Amount: $340.0 billion – 17% of total CARES Act

The biggest portion of funds going to local and state governments is the $274 billion allocated towards direct COVID-19 response. The rest of the funds in this component will go to schools and child care services.

Public and Health Services

Amount: $179.5 billion – 9% of total CARES Act

The biggest slice of this pie goes to healthcare providers, who will receive $100 billion in grants to help fight COVID-19. This was a major ask from groups representing the healthcare industry, as they look to make up the lost revenue caused by focusing on the outbreak — as opposed to performing elective surgeries and other procedures. There will also be a 20% increase in Medicare payments for treating patients with the virus.

Money is also set aside for initiatives such as increasing the availability of ventilators and masks for the Strategic National Stockpile, as well as providing additional funding for the Center for Disease Control and expanding the reach of virtual doctors.

Finally, beyond the healthcare-related funding, the CARES Act also addresses food security programs and a long list of educational and arts initiatives.

Hat tip to Reddit user SevenandForty for inspiring this graphic.

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COVID-19 Crash: How China’s Economy May Offer a Glimpse of the Future


This post is by Jenna Ross from Visual Capitalist

COVID-19 economic impact

The Economic Impact of COVID-19

China, once the epicenter of the COVID-19 pandemic, appears to be turning a corner. As the number of reported local transmission cases hovers near zero, daily life is slowly returning to normal. However, economic data from the first two months of the year shows the damage done to the country’s finances.

Today’s visualization outlines the sharp losses China’s economy has experienced, and how this may foreshadow what’s to come for countries currently in the early stages of the outbreak.

A Historic Slump

The results are in: China’s business activity slowed considerably as COVID-19 spread.

Economic Indicator Year-over-year Change (Jan-Feb 2020)
Investment in Fixed Assets* -24.5%
Retail Sales -20.5%
Value of Exports -15.9%
Industrial Production -13.5%
Services Production -13.0%

*Excluding rural household investment

As factories and shops reopen, China seems to be over the initial supply side shock caused by the lockdown. However, the country now faces a double-headed demand shock:

  • Domestic demand is slow to gain traction due to psychological scars, bankruptcies, and job losses. In a survey conducted by a Beijing financial firm, almost 65% of respondents plan to “restrain” their spending habits after the virus.
  • Overseas demand is suffering as more countries face outbreaks. Many stores are closing up shop and/or cancelling orders, leading to an oversupply of goods.

With a fast recovery seeming highly unlikely, many economists expect China’s GDP to shrink in the first quarter of 2020—the country’s first decline since 1976.

Danger on the Horizon

Are other countries destined to follow the same path? Based on preliminary economic data, it would appear so.

The U.S.
About half the U.S. population is on stay-at-home orders, severely restricting economic activity and forcing widespread layoffs. In the week ending March 21, total unemployment insurance claims rose to almost 3.3 million—their highest level in recorded history. For context, weekly claims reached a high of 665,000 during the global financial crisis.

“…The economy has just fallen over the cliff and is turning down into a recession.”

Chris Rupkey, Chief Economist at MUFG in New York

In addition, manufacturing activity in eastern Pennsylvania, southern New Jersey, and Delaware dropped to its lowest level since July 2012.

Globally
Other countries are also feeling the economic impact of COVID-19. For example, global online bookings for seated diners have declined by 100% year-over-year. In Canada, nearly one million people have applied for unemployment benefits.

Hard-hit countries such as Italy and Spain, which already suffer from high unemployment, are also expecting to see economic blows. However, it’s too soon to gauge the extent of the damage.

Light at the End of the Tunnel

Given the near-shutdown of many economies, the IMF is forecasting a global recession in 2020. Separately, the UN estimates COVID-19 could cause up to a $2 trillion shortfall in global income.

On the bright side, some analysts are forecasting a recovery as early as the third quarter of 2020. A variety of factors, such as government stimulus, consumer confidence, and the number of COVID-19 cases, will play into this timeline.

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The Hardest Hit Companies of the COVID-19 Downturn: The ‘BEACH’ Stocks


This post is by Dorothy Neufeld from Visual Capitalist

Beach stocks shrinking market cap

BEACH Stocks: $332B in Value Washed Away

The market’s latest storm has plunged the global travel industry into uncharted territory.

Since the S&P 500 market high on February 19, 2020, market capitalizations across BEACH industries—booking, entertainment, airlines, cruises, and hotels—have tumbled. The global airline industry alone has seen $157B wiped off valuations across 116 publicly traded airlines.

Investor confidence in cruise lines has also dropped. Between Carnival, Royal Caribbean, and Norwegian Cruise Line Holdings, over half of their market value has evaporated—equal to at least $42B in combined market capitalization.

Today’s infographic profiles the steep losses across BEACH companies. It looks at the ripple effects across individual companies and industries from the February 19 peak to date*.

*All numbers as of market close on March 24, 2020

Falling Off A Cliff

As the COVID-19 pandemic has spread to over 100 countries, many governments have implemented sweeping travel restrictions.

The impact across BEACH industries is far-reaching, with some valuations declining to nearly a quarter of their previous total.

Company Ticker Category Market Cap: 02/19/2020 Market Cap: 03/24/2020 % Change
Booking Holdings BKNG Booking $80.8B $51B -37%
Expedia Group EXPE Booking $17.1B $8.1B -53%
Allegiant Travel ALGT Booking $2.7B $1.4B -47%
Live Nation LYV Entertainment & Live Events $16.3B $9.1B -44%
Six Flags SIX Entertainment & Live Events $3.2B $1.1B -66%
Cedar Fair FUN Entertainment & Live Events $3.1B $1.3B -58%
The Walt Disney Co DIS Entertainment & Live Events $255.1B $177B -31%
Penn National Gaming PENN Entertainment & Live Events $4.3B $1.6B -63%
Delta Air Lines DAL Airlines $37.5B $17.8B -52%
United Airlines UAL Airlines $19.7B $8.4B -57%
American Airlines AAL Airlines $12.1B $6.1B -50%
Southwest Airlines LUV Airlines $29.5B $19.7B -33%
Alaska Air Group ALK Airlines $8B $3.7B -54%
Air Canada (in USD) AC Airlines $8.3B $2.8B -67%
Carnival CCL Cruise & Casino $30.8B $10B -67%
Royal Caribbean Cruises RCL Cruise & Casino $23.2B $7.5B -68%
Norwegian Cruise Lines NCLH Cruise & Casino $11.1B $3.1B -72%
Las Vegas Sands LVS Cruise & Casino $52.8B $35.1B -34%
MGM Resorts International MGM Cruise & Casino $16.2B $6.2B -68%
Wynn Resorts WYNN Cruise & Casino $14.6B $7.2B -51%
Caesars Entertainment CZR Cruise & Casino $10B $4.2B -58%
Eldorado Resorts ERI Cruise & Casino $5.4B $1.3B -76%
Marriott International MAR Hotels & Resorts $48.3B $25.7B -48%
Hilton HLT Hotels & Resorts $31.3B $19.4B -38%
Hyatt Hotels H Hotels & Resorts $9.1B $4.9B -46%
Choice Hotels International CHH Hotels & Resorts $6B $3.2B -46%
Wyndham Hotels & Resorts WH Hotels & Resorts $5.6B $2.9B -48%
Park Hotels PK Hotels & Resorts $5.5B $1.9B -66%
Vail Resorts MTN Hotels & Resorts $9.98B $5.8B -41%
Marriott Vacations Worldwide VAC Hotels & Resorts $5.3B $2.2B -59%

For instance, the consequences on various travel bookings brands have been severe. Booking Holdings, the parent company to Booking.com, Priceline, Kayak and OpenTable, witnessed share price declines of over 35% since the peak.

Empty Stadiums

Across the entertainment industry, ticket sales for concerts, movies, and other events are falling precipitously due to cancellations or postponements.

Upwards of $5B in global film industry losses could result from the COVID-19 pandemic.

Chilling footage of the Las Vegas strip, as well as other tourist epicenters around the world, shows deserted streets as visitors opt to stay home instead.

Bracing For Impact

Meanwhile, worldwide airline revenue is estimated to fall by as much as $113B in 2020.

In under two months, the share price of Delta Airlines has fallen over 50% as the company anticipates a capacity reduction of 40%, the largest in its history.

Company Ticker Feb 19 2020 Share Price Mar 24 2020 Share Price
Delta Air Lines NYSE:DAL $58.5 $26.9
United Airlines NASDAQ:UAL $79.4 $33
American Airlines NASDAQ:AAL $28.3 $13.9
Southwest Airlines NYSE:LUV $56.89 $37.7
Alaska Air Group NYSE:ALK $65.2 $28.9
Air Canada (in CAD) TSX:AC $45.3 $15.1

The global airline industry—which employs over 10M people—supports $2.7T in global economic activity across an average of 12M passengers per day.

Aruba, Jamaica No More

As for the cruise line industry, global operations came to a 30-day standstill in mid-March. Over 800 COVID-19 cases and 10 deaths across three cruise ships have been discovered.

“COVID-19 on cruise ships poses a risk for rapid spread of disease, causing outbreaks in a vulnerable population, and aggressive efforts are required to contain spread.”

CDC

Carnival, a Miami-based company, has witnessed its share price fall to around one third of its February 19 value. Similarly, Royal Caribbean Cruises, which has seen its market cap plummet almost 70%, announced that it will suspend trips until mid-May.

Occupancy Dilemma

As the hotel industry is impacted by the global outbreak, share prices have also realized a significant slump. In the U.S., an estimated $1.4B in revenue is vanishing each week. If occupancy levels fall by just 30% this year, the U.S. hotel industry could see approximately 4 million jobs wiped out.

The Baird/STR Hotel Stock Index, which serves as a benchmark for the sector’s overall health, has declined over 47% year-to-date.

baird hotel stock index

Global Stimulus Response

A number of travel industries around the world are calling for stimulus packages.

On March 25, the U.S. Congress finalized a historic $2T deal, which includes $25B in grants for the airline industry. In the UK, officials are providing small businesses in hospitality and leisure grants that are worth up to $30,000 as part of its $400B bailout plan.

China, Germany, Italy, and Spain have outlined multibillion dollar proposals in response to COVID-19. Overall, at least eleven countries have announced stimulus plans along with the European Commission and the IMF.

When Will the Travel Wave Hit Again?

Amid the COVID-19 pandemic one thing is clear: the impact on the travel industry will have a marked effect on the broader economy.

Travel is closely linked with oil, as transportation accounts for over 60% of global demand. In Q2 2020, global oil consumption is projected to fall by 25M barrels per day.

Along with this, discretionary consumer spending makes up over one third of America’s GDP. The impact of the pandemic across this sector is expected to contribute to a 10% decline or more in U.S. GDP for the second quarter.

As conditions materially improve around the world—with China beginning to open up flights—positive signs are emerging from under the surface. Will BEACH industries quickly bounce back as infection rates drop, or will a slow and painful recovery unfold in the months ahead?

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The post The Hardest Hit Companies of the COVID-19 Downturn: The ‘BEACH’ Stocks appeared first on Visual Capitalist.

Black Swan Events: Short-term Crisis, Long-term Opportunity


This post is by Jenna Ross from Visual Capitalist

Black Swan Events and time to recovery

Black Swans: Short-term Crisis, Long-term Opportunity

Few investors could have predicted that a viral outbreak would end the longest-running bull market in U.S. history. Now, the COVID-19 pandemic has pushed stocks far into bear market territory. From its peak on February 19th, the S&P 500 has fallen almost 30%.

While this volatility can cause investors to panic, it’s helpful to keep a long-term perspective. Black swan events, which are defined as rare and unexpected events with severe consequences, have come and gone throughout history.

In today’s Markets in a Minute chart from New York Life Investments, we explore the sell-off size and recovery length for some of these events.

Wars, Viruses, and Excessive Valuations

With sell-offs ranging from -5% to -50%, black swan events have all impacted the S&P 500 differently. Here’s a look at select events over the last half-century:

Event Start of Sell-off/Previous Peak Size of Sell-off Duration of Sell-off (Trading Days) Duration of Recovery (Trading Days)
Israel Arab War/Oil Embargo October 29, 1973 -17.1% 27 1475
Iranian Hostage Crisis October 5, 1979 -10.2% 24 51
Black Monday October 13, 1987 -28.5% 5 398
First Gulf War January 1, 1991 -5.7% 6 8
9/11 Attacks September 10, 2001 -11.6% 6 15
SARS January 14, 2003 -14.1% 39 40
Global Financial Crisis October 9, 2007 -56.8% 356 1022
Intervention in Libya February 18, 2011 -6.4% 18 29
Brexit Vote June 8, 2016 -5.6% 14 9
COVID-19* February 19, 2020 -29.5% 19 N/A (ongoing)

* Figure as of market close on March 18, 2020. The sell-off measures from the market high to the market low.

While the declines can be severe, most have been short-lived. Markets typically returned to previous peak levels in no more than a couple of months. The Oil Embargo, Black Monday, and the Global Financial Crisis are notable outliers, with the recovery spanning a year or more.

After Black Monday, the Federal Reserve reaffirmed its readiness to provide liquidity, and the market recovered in about 400 trading days. Both the 1973 Oil Embargo and 2007 Global Financial Crisis led to U.S. recessions, lengthening the recovery over multiple years.

COVID-19: How Long Will it Last?

It’s difficult to predict how long COVID-19 will impact markets, as its societal and financial disruption is unprecedented. In fact, the S&P 500 reached a bear market in just 16 days, the fastest time period on record.

Time for bear market to occur

Some Wall Street strategists believe that the market will only begin to recover when COVID-19’s daily infection rate peaks. In the meantime, governments have begun announcing rate cuts and fiscal stimulus in order to help stabilize the economy.

Considering the high levels of uncertainty, what should investors do?

Buy on Fear, Sell on Greed?

Legendary investor Warren Buffet is a big proponent of this strategy. When others are greedy—typically when prices are boiling over—assets may be overpriced. On the flipside, there may be good buying opportunities when others are fearful.

Most importantly, investors need to remain disciplined with their investment process throughout the volatility. History has shown that markets will eventually recover, and may reward patient investors.

Note: This post originally came from our Advisor Channel, a partnership with New York Life Investments that aims to create a go-to resource for financial advisors and their clients to navigate market trends.

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You’re Grounded: The COVID-19 Effect on Global Flight Capacity


This post is by Iman Ghosh from Visual Capitalist

You're Grounded: The COVID-19 Effect on Global Flight Capacity

You’re Grounded: The COVID-19 Effect on Flight Capacity

It’s not an exaggeration to say that the COVID-19 pandemic has thrown the world into a tailspin.

As the number of new cases continues to surge in parts of the world, numbers are beginning to decline in others as public health officials and governments tirelessly work to slow the contagion and reach of the virus.

The potent combination of trip cancellations and country-specific restrictions on international flights has had a staggering impact on the $880 billion global airline industry. Today’s visualization highlights data from the OAG Aviation Worldwide, which tracks how global flight capacity differs from last year’s numbers.

Asia Faced the First Hard Landing

Nearly all countries have some type of travel advisory in place, with many encouraging people to avoid non-essential travel even before COVID-19 was officially considered a pandemic by the World Health Organization (WHO).

The earliest impacts of these were felt in February, as flight capacity in and out of China dropped sharply around Lunar New Year. Also, the country’s sharpest year-over-year drop was recorded on February 17, 2020, with a 71% drop in flights compared to the same date in 2019.

Flight capacity for Hong Kong, which was already seeing its traveler numbers declining due to months-long protests, continues its slump. As of March 16, 2020, it was down by an immense 81% compared to 2019 – the most of any jurisdiction represented in the data.

Monitoring the Situation Elsewhere

Meanwhile in Europe, Italy saw a 22% drop in flights coinciding with the announcement of a national lockdown on March 9, 2020. Now that the situation has intensified, flights to and from Italy have plummeted 74% from their normal rates.

On March 11, 2020, the U.S. enforced a 30-day ban on travelers from the Schengen Area, a free-travel zone consisting of 26 countries in Europe. Although the UK and Ireland were initially exempt, the ban has since been extended to include both countries as well.

Meanwhile, as of March 17th, the U.S.-Canada border is closed for all non-essential travel. This follows a previous announcement from the Canadian government that it would be curbing entry to only Canadian citizens, family members, permanent residents, diplomats, and Americans.

Broadly speaking, countries around the world are taking similar actions to limit the spread of the virus and “flatten the curve”:

Measure Taken Example Countries*
Suspending flights from specific countries 🇺🇸United States, 🇹🇷Turkey
Returning citizens must enter through specific airports 🇨🇦Canada, 🇺🇸United States
Mandatory screening 🇮🇹Italy, 🇧🇴Bolivia
14 day self-quarantine 🇮🇱Israel, 🇬🇷Greece
Complete closure of borders 🇬🇹Guatemala, 🇵🇪Peru

*As of March 17, 2020

More Turbulent Times Ahead?

As both COVID-19 and the global response to it continues to evolve, here are the largest flight capacity reductions across a few more countries in the past week:

Country 09 Mar 2020 Flights 16 Mar 2020 Flights % Change (16 Mar vs 9 Mar)
🇩🇪 Germany 2,426,098 1,984,441 -18.2%
🇨🇭 Switzerland 645,091 545,745 -15.4%
🇸🇦 Saudi Arabia 1,301,605 1,102,472 -15.3%
🇦🇪 UAE 1,363,573 1,154,960 -15.3%
🇫🇷 France 1,979,374 1,740,128 -12.1%
🇪🇸 Spain 2,498,114 2,214,571 -11.4%
🇰🇷 South Korea 795,752 710,558 -10.7%
🇹🇷 Turkey 1,775,305 1,630,475 -8.2%
🇹🇭 Thailand 1,514,844 1,402,191 -7.4%
🇵🇹 Portugal 578,093 536,127 -7.3%

Source: OAG

Naturally, the economic impact on airlines has been immense. Nearly 40% of flights impacted by the European travel bans are U.S. based, such as Delta and United Airlines, with billions in lost revenue already estimated for this year.

Many airlines worldwide face the threat of bankruptcy in coming months, if these declining trends continue. To hedge against these domino effects of the outbreak, U.S. airlines are requesting upwards of $60 billion in bailouts and direct assistance from the government.

COVID-19 is throwing everything up in the air—including the fate of airline companies. It’s not yet clear when these stringent travel restrictions may be lifted, but one can only hope that these airlines do not have to continue to weather the storm much longer.

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Chart: The Downward Spiral in Interest Rates


This post is by Jeff Desjardins from Visual Capitalist

During the onset of an economic crisis, national governments are thought to have two chief policy tools at their disposal:

  1. Fiscal Policy
    How the central government collects money through taxation, and how it spends that money
  2. Monetary Policy
    How central banks choose to manage the supply of money and interest rates

Major fiscal policy changes can take time to be implemented — but since central banks can make moves unilaterally, monetary policy is often the first line of defense in settling markets.

As the ripple effect of the COVID-19 pandemic rages on, central banks have been quick to act in slashing interest rates. However, with rates already sitting at historic lows before the crisis, it is possible that banks may be forced to employ more unconventional and controversial techniques to try and calm the economy as time goes on.

The Fed: Firing at Will

The most meaningful rate cuts happened on March 3rd and March 15th after emergency meetings in the United States.

First, the Federal Open Market Committee (FOMC) cut the target rate from 1.5% to 1.0% — and then on Sunday (March 15th) the rate got chopped by an entire percentage point to rub up against the lower bound of zero.

Fed rate cuts historical

As you can see on the chart, this puts us back into familiar territory: a policy environment analogous to that seen during the recovery from the financial crisis.

ZIRP or NIRP?

It’s been awhile, but with interest rates again bumping up against the lower bound, you’ll begin to see discussions pop up again about the effectiveness of zero interest rate policy (ZIRP) and even negative interest rate policy (NIRP).

Although the latter has been used by some European banks in recent years, NIRP has never been experimented with in the United States or Canada.

Here’s a quick primer on both:

NIRP and ZIRP

With rates sitting at zero, it’s not impossible for the Fed and other central banks to begin toying more seriously with the idea of negative rates. Such a move would be bold, but also seen as highly experimental and risky with unforeseen consequences.

Global Rate Slashing

Since only the beginning of March, the world’s central banks have cut interest rates on 37 separate occasions.

The only exception to this rule was the National Bank of Kazakhstan, which raised its key rate by 2.75% to support its currency in light of current oil prices. Even so, the Kazakhstani tenge has lost roughly 15% of its value against the U.S. dollar since February.

Here’s a look at cumulative interest rate cuts by some of the world’s most important central banks, from January 1, 2020 until today:

Central Bank Moves YTD

Going into the year, rates in developed economies were already between 0% and 2%.

Despite not having much room to work with, banks have slashed rates where they can — and now out of major developed economies, Canada has the “highest” interest rate at just 0.75%.

Helicopters on the Horizon

With central banks running out of ammo for the use of traditional measures, the conversation is quickly shifting to unconventional measures such as “helicopter money” and NIRP.

Life is already surreal as societal measures to defend against the spread of COVID-19 unfold; pretty soon, monetary measures taken around the globe may seem just as bizarre.

Put another way, unless something changes fast and miraculously, we could be moving into an unprecedented monetary environment where up is down, and down is up. At that point, it’s anybody’s guess as to how things will shake out going forward.

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The post Chart: The Downward Spiral in Interest Rates appeared first on Visual Capitalist.

The Pandemic Economy: Which Stocks are Weathering the Storm?


This post is by Jeff Desjardins from Visual Capitalist

The Pandemic Economy infographic

The Pandemic Economy: The Stocks Weathering the Storm

When markets get wacky, even the best companies can’t avoid the maelstrom.

Investors were already tiptoeing on broken glass, knowing that the longest U.S. stock market bull run in history was getting long in the tooth.

Then, when the market foresaw the potential damage that could be caused by the COVID-19 pandemic, it quickly created a vortex that would suck almost everything into it.

Bizarro Market

In the last week, markets flipped into an alternate universe. Every major stock got crushed, while suddenly those holding onto stockpiles of toilet paper and soup reigned supreme.

In such unique circumstances, we wondered which companies were weathering the storm of volatility. To do this, we used Finviz to pull up a visualization of S&P 500 performance, then investigating the segments of the market that were doing well in spite of the recent plunge.

Stock selection Performance (Mar 5-12) Components
S&P 500 -18.0% 📉 The 500 largest U.S. companies by market cap
The Pandemic Economy +12.7% 📈 Soup, bleach, pizza, and telecommuting stocks

A few companies not only avoided the chaos — they actually thrived over the last week.

Let’s look at why!

Not Getting Bugged Down

With global travel, events, and social gatherings screeching to a halt, it’s obvious that this is not a winning situation for any typical economy.

However, it’s hard for everyone to simultaneously be a loser, and it’s always inevitable that some stocks will benefit from any crisis — Continue reading The Pandemic Economy: Which Stocks are Weathering the Storm?