UBS: GDP, stock index and inflation, aftermath of the pandemic

The global financial services company UBS highlighted the main aftermath of the Covid-19 pandemic on GDP, stock indices and inflation in various world markets during 2020.

For starters, Swiss GDP fell 3%, compared to a growth rate of 1.1% in 2019.

For its part, the GDP of the United States decreased 3.5%, after a growth of 2.2% in 2019, as restrictions related to Covid-19 slowed down economic activity.

The contraction was even more acute in the euro zone, with a 6.8% drop in GDP, after a 1.3% expansion in 2019.

In general, according to UBS, the economies of the euro zone have suffered more than the United States from a reduction in world trade flows.

In particular, Germany‘s economy contracted 5.3%, after growing 0.6% in 2019.

The United Kingdom registered the largest contraction of all, with a decline in GDP of 9.9 percent.

UBS

Globally, China was one of the first nations to begin to recover from the pandemic and suffered less from new waves of the virus than Europe or the United States.

The growth of the Chinese economy slowed to 2.3%, following a growth of 6.1% in 2019.

Other leading Asian economies also weathered the pandemic relatively well, with South Korea‘s economy contracting just 1%, after growing 2.7% in 2019.

Taiwan was a rare example of a developed economy that managed to grow in 2020, with a 3 percent GDP expansion.

Latin America

The major emerging markets outside of Asia were generally less resilient.

Mexico‘s economy contracted 8.5% after a 0.3% contraction in 2019.

Meanwhile, Brazil‘s growth was minus 4.7%, after a growth of just 1.1% in 2019.

According to UBS, world GDP contracted 3.4%, after growing 2.9% in 2019.

The Fed

Major central banks tried to cushion the economic blow of the pandemic, lowering interest rates, expanding quantitative easing programs, and introducing emergency loan facilities.

In particular, UBS stated that the Federal Reserve’s balance sheet expanded from around $ 4 trillion to $ 7 trillion.

In turn, the European Central Bank (ECB) kept rates at minus 50 basis points, while rates remained at minus 75 basis points in Switzerland.

That did not prevent inflation from reaching targets in most countries: in the United States, inflation was 1.9%, compared to a target of 2%; the euro zone posted just 0.4% inflation, compared to a target of 2% or just below.

But central bank easing, substantial fiscal support and optimism about the start of vaccine launches helped equity markets move forward despite economic headwinds.

Thus, the MSCI All Country World index rose 14.3% and the S&P 500 climbed 16.2 percent.

The biggest advance came in the technology sector, with the Nasdaq Composite rising 43.6 percent.

Meanwhile, China’s CSI 300 outperformed notably, up 27.2 percent.

It was also a favorable year for investors in holding government bonds.

The 10-year US Treasury yield fell about 100 basis points to 0.92 percent.

The 10-year German Bund yield fell 35 basis points to negative 0.53%.