One chart from Deutsche Bank shows the staggering scale of government bailouts in 2020 compared to every financial crisis in the last 50 years
Deutsche Bank recently published a chart that looks at the biggest bailouts in history. The chart, which presents central bank moves from the 1970s, shows that the 2020 international government bailouts have been the largest in history. "What that does to productivity in the future is an open question as to whether we can ever see proper capitalism again with current levels of global debt-GDP," the bank's analysts said. Visit Business Insider's homepage for more stories.
International government bailouts in 2020, as a response to the coronavirus pandemic, have been the largest in history, and a chart published by Deutsche Bank Monday shows the truly staggering scale of 2020's interventions. For 2020, analysts combined the fiscal and monetary relief programs announced by the US and the largest economies in Europe so far as the world battles the coronavirus. See the incredible scale of the bailouts compared to others since the 70s, many of which barely register, below:
"We won't know how much will be used until much further down the road but these are the main commitments undertaken so far as we see them," the analysts said. The chart also shows overall G7 debt (private and public) to gross domestic product to indicate that as debt goes higher, so does the level of bailout needed to protect the system. Read more: An expert at Boyar Research lays out the Warren Buffett-inspired investing approach that's helped the firm crush the market for 7 years — and offers 4 stock picks for a coronavirus-battered market In stark contrast to the global financial crisis, the coronavirus pandemic moved the global bailout currency from a massive $10 billion to an enormous $10 trillion figure, analysts showed. The "prior 20-25 year bailout culture" and extremely low policy rates left economies with higher debt requiring bailout numbers to be just as high on any external shock, analysts said without wanting to put the blame on policymakers. They added that even without the Covid-19 shock, the next recession would likely require multiple trillion dollars of intervention to protect the current economic system. "We are once more in too big to fail territory," the analysts said in relation to authorities doing all they can to minimise defaults from the crisis. "What that does to productivity in the future is an open question as to whether we can ever see proper capitalism again with current levels of global debt-GDP."SEE ALSO: Coronavirus demolished air travel around the globe. There 14 charts show how empty the skies are right now. Join the conversation about this story » NOW WATCH: Why electric planes haven't taken off yet
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The International Monetary Fund on Wednesday again slashed its forecast for the global economy, seeing a...The International Monetary Fund on Wednesday again slashed its forecast for the global economy, seeing a deeper recession and longer recovery from the shock of the coronavirus pandemic. The fund now expects global gross domestic product to contract 4.9% this year, down from its 3% forecast in April. It also cut its 2021 expectations, and now forecasts growth of 5.4%, a step down from its previous estimate of 5.8% growth. Read more on Business Insider. The International Monetary Fund on Wednesday slashed its forecast for the global economy again, predicting a sharper recession and longer recovery from the impact of the coronavirus pandemic. The IMF now sees global gross domestic product shrinking 4.9% in 2020, a worse contraction than the 3% decline it previously forecast in April. The fund also foresees a slower-than-expected recovery — it cut its expectations for global growth in 2021 to 5.4% from 5.8%. "The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast," the IMF said in its World Economy Outlook update. The update comes after the IMF in April said the shock of the coronavirus pandemic and sweeping lockdowns to contain the disease would form the worst economic meltdown since the Great Depression. Now, the IMF's dire forecast reflects "greater scarring" from a larger-than-anticipated hit to activity, and continued lower demand from social distancing practices. "The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s," the IMF said. Overall, the new forecast would leave 2021 GDP more than six percentage points lower than in the IMF's pre-COVID projections of January 2020, according to the report. The IMF said that as in April, the current forecast comes with a "higher-than-usual degree of uncertainty" due to the pandemic. Read more: Aram Green has crushed 99% of his stock-picking peers over the last 5 years. He details his approach for finding hidden gems — and shares 6 underappreciated stocks poised to dominate in the future. The IMF also sees a severe hit to the global labor market, and said the loss of work hours in the second quarter is likely equivalent to more than 300 million full-time jobs. "The hit to the labor market has been particularly acute for low-skilled workers who do not have the option of working from home," said the IMF. "Income losses also appear to have been uneven across genders, with women among lower-income groups bearing a larger brunt of the impact in some countries." There are some bright spots, according to the IMF. Financial conditions have eased in advanced and to a lesser extent emerging economies, forestalling worse near-term losses. Announced fiscal measures are now about $11 trillion globally, up from $8 trillion in April, the report showed. Still, significant downside risks to the forecast remain without a medical breakthrough such as a vaccine or a sharp rebound in business activity. More lockdowns, tightening financial conditions, prolonged unemployment, and wider firm closures could lead to more economic pain. "This could tip some economies into debt crises and slow activity further," said the IMF. The IMF sees advanced economies experiencing sharper declines in GDP, forecasting an 8% contraction in 2020 compared with a 3% decline in emerging economies. US GDP is expected to decline 8% in 2020, worse than the IMF's April forecast of 5.9%. In 2021, US GDP may grow 4.5%, according to the report. The Europe area GDP is expected to slump 10.2% in 2020, and grow 6% in 2021. China is forecast to grow 1% this year and 8.2% next year, according to the report. Read more: A CEO overseeing $147 million outlines his 4-part strategy for identifying which stocks to buy — and shares 2 he sees primed to explode higher right nowJoin the conversation about this story » NOW WATCH: Tax Day is now July 15 — this is what it's like to do your own taxes for the very first time
Dozens of countries that borrowed from private investors have debt payments coming due as their economies...Dozens of countries that borrowed from private investors have debt payments coming due as their economies have crashed because of the coronavirus.
JPMorgan provides 5 charts that suggest the stock market still has 'plenty of room' to rise from current levels
Stocks still have plenty of room to rise from current levels, according to a note published...Stocks still have plenty of room to rise from current levels, according to a note published by JPMorgan on Friday. The bank largely pointed to investors' underweight equity positioning as a main driver for stocks to move higher over the medium to longer term, despite near-term risks of elevated momentum. Investors' allocation to stocks is 40%, which is below historical averages and is well below the early 2018 high of 49%. With bonds yielding next to nothing, investors may return to stocks and drive up prices as fears over the coronavirus pandemic subside. Here are the five charts JPMorgan pointed to in support of its bullish view on stocks. Visit Business Insider's homepage for more stories. Stocks still have "plenty of room" to rise further from current levels after a nearly 40% rally off the lows, according to a note published by JPMorgan on Friday. The bank acknowledged that short-term risks are present, especially with elevated momentum positioning by traders, which signals overbought levels. But over the medium to longer term, JPMorgan said it thinks stocks are the place to be. The short-term overbought condition is "not enough by itself to stop or derail a bull market underpinned by four medium to longer term drivers," the bank said. Those four drivers include a still-low overall equity positioning backdrop; a rapid healing of funding markets; a structural change in the liquidity and interest rate environment; and a rapid economic recovery driven by steady lockdown relaxation. Part of JPMorgan's argument is similar to a recent note from Bank of America, which pointed to a potential "Great Rotation" by investors from bonds into stocks. Despite the nearly 40% rally in stocks since the March 23 low, investors' stock allocation "isn't much different from last March's backdrop as the rise in cash holdings and the expansion of the value of the bond universe partly offset the equity rally," the bank said. Read more: David Herro was the world's best international stock picker for a decade straight. He breaks down 8 stocks he bet on after the coronavirus decimated markets — and 3 he sold. JPMorgan said it thinks investors will increase their allocation to stocks given the favorable backdrop of high liquidity and low interest rates. Here are the five charts JPMorgan used to expand on its reasoning for being bullish on stocks.1. Short interest remains elevated This chart is a short interest proxy of the S&P 500 index. It shows that bearish traders still have elevated short bets on the market. As the market grinds higher, the bank expects shorts to cut their losses and close out their short positions, which would creating buying pressure in stocks. 2. Investors are underweight stocks Non-bank investors currently have a 40% allocation to equities, which is below its historical average and below its 2018 high of 49%. The chart shows that there is plenty of room to move higher for investors' allocations to stocks. JPMorgan believes equilty allocations are likely to increase over the next few years thanks to low interest rates and high liquidity. Investor fear surrounding the coronavirus pandemic would likely help improve equity positioning as well. 3.Investors are overweight bonds On the flip side of investors' low equity positioning, is their current allocation to bonds. Investors rushed into bonds amid the coronavirus pandemic, pushing the bond allocation to 24%, well above its historical average of 19%. As investor fear over the virus subsides, and investors wake up to the near-zero interest rates they're receiving with their fixed income holdings, it is very possible that they will rotate into stocks, according to JPMorgan. 4. Cash positions remain elevated JPMorgan's implied cash allocation level has also spiked amid the cornavirus pandemic, but remains at its historical average of 37%. The bank said given cash yields are zero across the board for the foreseeable future, "it remains reasonable to expect this cash allocation to decline further over the medium to longer term." With more than $4 trillion in cash on the sidelines, JPMorgan isn't the only one looking for that cash to be put to use into stocks. 5. Funding markets are healing Most important to the economy is the ability for credit markets to function properly. If a company is cut off from raising new debt in the credit markets, it could be put in a poor position that ultimately ends in bankruptcy. Fed Chair Jerome Powell's main mission with the Fed's monetary stimulus policies, such as buying high-yield debt, was to make sure the credit markets could still function, and companies could still raise much-needed money amid an economic crisis. It looks like Powell's actions helped calm the credit markets. Besides back-to-back record debt issuance by corporations in March and April, JPMorgan pointed to the spread in Libor interest rates stabilizing at levels around 30 basis points as evidence that the credit markets are functioning properly.