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Ok. Got itDespite lockdowns and more contagious variants of the coronavirus, the global economy is expected to expand in 2021.
With the onset of a new year, the world remains in various degrees of lockdown. Despite the restrictions, the reopening of economies and improved activity in 2021 are made more likely by the approval and rollout of vaccines, even if uneven, across the world. These sentiments were echoed by the International Monetary Fund (IMF) and World Bank, both forecasting an expansion for the global economy for 2021 of 5,5% and 4,0% respectively. Although this is likely the case, the environment remains fluid. More contagious variants of the coronavirus have been identified in South Africa and the UK, driving the acceleration in caseloads. This will keep the pandemic at the forefront of everyone’s mind, most notably that of policymakers.
The oil price received a boost in January, when the world’s largest oil exporter, Saudi Arabia, agreed to voluntary output cuts of one million barrels in February and March, as OPEC+ members allowed an increase in Russian production levels. This drove the oil price to its highest level in 11 months.
The S&P 500 retraced 1,0% over the month, with technology-heavy Nasdaq managing to gain 0,3%. Emerging markets outperformed developed-market peers, benefiting from resilient economic data from China. The MSCI World index delivered -1,0% against a credible 3,1% for the MSCI Emerging Markets Index. It is unsurprising that accommodative monetary and fiscal policy, easily accessible trading platforms and equity markets at all-time highs would culminate in some level of speculative activity. This was no more evident than in the astronomical ascent of the GameStop GameStop share price, a video game retailer that saw its share price increase by about 1 500% over the course of two weeks in January. Retail traders and hedge funds battled it out for the fortunes of GameStop as they took opposing views on the trade, driving gauges of market volatility to their highest levels in months.
Democrats won both Senate seats in the Georgia run-off elections, which tilts the balance of power in favour of the Democratic Party – albeit marginally. With lingering concerns that protests at the Capitol would be repeated, President-elect Biden’s inauguration proceeded without incident. The new administration moved swiftly to reverse many of the previous administration’s decisions. In the first few days, the US halted the withdrawal from the World Health Organisation, re-entered the Paris Agreement on climate change and cancelled some of the more controversial border restrictions. A financial agenda and key appointments were not far behind. The Biden administration announced fiscal stimulus plans amounting to $1,9 trillion and the Senate approved his nominee, former Federal Reserve chair Janet Yellen for the position of Treasury secretary. Getting the new stimulus plans passed will give the first glimpse of how collegiate the new order will be and how slim the majority really is.
Vaccine nationalism is a phrase that will likely be used often to sum up the inextricable inequality and self-preservation seen in the progress towards population immunity. It was always understood that finances would be a driver in the uneven ability to procure and roll out vaccinations. This largely stems from the fact that many of the wealthier countries have the money to procure supplies directly and negotiate at scale. Countries with fewer resources could also do the former or harness the scale and access of programmes like Covax. Wealthier countries have been first in line, with a few securing supplies of vaccines that would cover their population multiple times over. Squabbles between the UK, EU and AstraZeneca after the company ran into production issues at their European plant highlights some of these themes. Ironically, however, with global trade and travel deeply embedded in the way we live, population immunity will be more effective if it can be achieved for most of the world.