Last week saw many of the developed nations release their GDP data relating to the final quarter of 2020. The UK economy grew 1.0% in this period, beating market expectations, and meant that the UK avoided a double-dip recession. However, the annual GDP growth figures looked less compelling with the UK economy shrinking by 9.9% in 2020, the largest annual fall on record. The UK has been one of the hardest hit economies globally with the closure of the tourism and travel industries significantly impacting output, which contributes a staggering 11% to GDP.
Elsewhere, the final US GDP estimate will be released next week but the expectation is that the US grew at 4.0% in the final quarter of 2020. Revenues of companies who constitute the S&P 500 grew by 1.3% in the final three months of 2020 with profits accelerating 3.4%, beating analyst expectations. The proposed $1.9 trillion stimulus package would certainly boost consumption and reduce unemployment levels which currently sit at 6.3%. Goldman Sachs has forecasted that the proposed stimulus bill of $1.9 trillion may be reduced to $1.5 trillion, however this still equivalates to 7% of GDP.
The International Monetary Fund (IMF) also released its global outlook projections with world output expected to grow at 5.5% in 2021, with emerging markets such as China and India expected to lead the way. Markets followed this same narrative last week with Morgan Stanley Capital International (MSCI) Emerging markets returning +1.50%, outperforming the S&P 500 and the FTSE All Share in Sterling terms.
