Zacks Investment Management

In today’s Steady Investor, we dive into current news and key indicators in the market that we believe investors should consider such as:

• Is U.K economy feeling the sting of Brexit?
• Spending more on information technology
• China economy posts week growth in Q3

Is the U.K. Economy Feeling the Sting of Brexit? On January 1, 2021, the U.K. formally began its new relationship with the European Union (EU). Trade data recorded since suggests that the U.K. has suffered bigger trade setbacks than the rest of the developed world – the value of U.K. exports to the EU fell by -13% (compared to 2019) in the first eight months of the year, which was higher than the drop in exports to non-EU countries. On the flip side, imports from the EU were -20% lower, while imports from the rest of the world were up 1%. As global trade has rebounded amongst developed countries over the past several months, the U.K. is lagging behind in its recovery. Trade with the EU is a big part of the issue – the U.K. accounted for 7% of imports into the EU in 2019, but by this August that number had shrunk to 4.3%. The overarching problem isn’t free trade. The EU and the U.K. struck a deal at the end of 2020 ensuring no tariffs and quotas on cross-border trade. The issue is that pre-Brexit, those goods sailed across borders with no customs issues or arduous paperwork. Post-Brexit, those goods are subject to many of the same formalities of cross-border trade with other countries. The U.K. is hoping that trade agreements signed with other nations – Canada, Japan, and South Korea for instance – can offset some of the EU trade losses. Striking a trade deal with the U.S. could also be a major benefit, but those talks are still in the early stages.¹

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Spending More on Information Technology – The pandemic catalyzed the use of technology in business. Many businesses had already been investing in ‘digital infrastructure,’ which could mean anything from the increasing use of software to the integration of enterprise cloud services, to processing orders and transactions online. Workers can increasingly work from anywhere because of advances in the digital economy, and for many companies, there is no going back to the previous five-day-a-week in the office structure. It follows that information technology budgets are expected to increase at their fastest pace in over 10 years, as companies see the urgency of developing and/or improving their digital (IT) infrastructure. According to the research firm Gartner, IT budgets are expected to grow 2% in 2021 and accelerate to 3.6% in 2022. It has also been reported that 51% of executives see an increasing need to invest in business intelligence and data analytics tools.³

China Economy Posts Weak Growth in Q3 – As largely expected, China’s economic growth slowed in the third quarter, as a range of issues from a real estate bubble, to a state crackdown on private enterprise, to an energy crunch weighed on output. China’s GDP posted 4.9% growth from the same quarter in 2020, which also marked a sharp slowdown from the 7.9% figure posted in Q2. The confluence of headwinds in Q3 presented somewhat of a ‘perfect storm’ weighing on China’s economy, and some of those issues may persist into Q4. The likelihood of a recession in China remains low, however, as the state has many tools to manage growth and as some of the headwinds at play could be short-term in impact.⁴

How to Protect Your Retirement from Market Volatility? While there is no way to prevent market volatility, there is a way to protect your retirement assets through market ups and downs. We recommend finding a retirement strategy that takes the “what ifs” into account. Our free guide can help you to prepare for what’s to come as you plan your ultimate retirement.

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