Every day, the Information Age bombards us with massive amounts of data.
Experts now estimate that there are 40 times more bytes of data in existence than there are stars in the whole observable universe.
And like the universe, our datasphere is also rapidly expanding—and every few years, there is actually more new data created than in all prior years of human history combined.
Searching for Signals
On a practical level, this dense wall of impenetrable data creates a multitude of challenges for investors and decision makers alike:
- It’s mentally taxing to process all the available information out there
- Too much data can lead to “analysis paralysis”—an inability to make decisions
- Misinformation and media slant add another layer for our brains to process
- Our personal biases get reinforced by news algorithms and filter bubbles
- Data sources—even quality ones—can sometimes conflict with one another
As a result, it’s clear that people don’t want more data—they want more understanding. And for this reason, our team at Visual Capitalist has spent most of 2020 sifting through the noise to find the underlying trends that will transform society and markets over the coming years.
The end result of this effort is our new hardcover book “SIGNALS: Charting the New Direction of the Global Economy” (hardcover, ebook) which beautifully illustrates 27 clear signals in fields ranging from investing to geopolitics.
The 6 Signals Shaping the Future of Finance
What clear and simple trends will shape the future of markets?
Below, we show you a small selection of the hundreds of charts found in the book with a focus on global finance and investing:
#1: 700 Years of Falling Interest Rates
The first signal we’ll showcase here is from an incredible dataset from the Bank of England, which reconstructs global real interest rates going back all the way to the 14th century.
Some of the first data points in this series represent well-documented municipal debt issued in early Italian banking centers like Genoa, Florence, or Venice, during the beginning stages of the Italian Renaissance.
The early data sets of loans to noblemen, merchants, and kingdoms eventually merge with more contemporary data from central banks, and over the centuries it’s clear that falling interest rates are not a new phenomenon. In fact, on average, real rates have decreased by 1.6 basis points (0.016%) per year since the 14th century.
This same spectacle can also be seen in more modern time stretches:
And as the world reels from the COVID-19 crisis, governments are taking advantage of record-low rates to issue more debt and stimulate the economy.
This brings us to our next signal.
#2: Global Debt: To $258 Trillion and Beyond
The ongoing pandemic certainly made analysis trickier for some signals, but easier for others.
The accumulation of global debt falls into the latter category: as of Q1 2020, global debt sits at a record $258 trillion or 331% of world GDP, and it’s projected to rise sharply as a result of fiscal stimulus, falling tax revenues, and increasing budget deficits.
The above chart takes into consideration consumer, corporate, and government debt—but let’s just zoom in on government debt for a moment.
The below data, which is from early 2020, shows government debt ballooning between 2007 and early 2020 as a percentage of GDP.
This chart does not include intragovernmental debt or new debt taken on after the start of the pandemic. Despite this, the percentage increase in debt held by some of these governments is in the triple digits over a period of only 13 years, including the 233% increase in the United States.
But it’s not just governments going on a borrowing spree. The following chart shows consumer debt over a recent four-year span, sorted by generation:
While Baby Boomers and the Silent Generation are successfully winding down some of their debt, younger generations are just getting aboard the debt train.
Between 2015-2019, Millennials added 58% to household debt, while Gen Xers find themselves (in the middle of their mortgage-paying years) as the most indebted generation with $135,841 of debt per household.
#3: Blue Chips and the Circle of Life
There was a time when it seemed absolutely unfathomable that large, entrenched companies could see their corporate advantages slide away.
But as the recent collapses of Blockbuster, Lehman Brothers, Kodak, or various retailers have taught us, there are no longer any guarantees around corporate longevity.
In 1964, the average tenure of a company on the S&P 500 was 33 years, but this is projected to fall to an average of just 12 years by the year 2027 according to consulting firm Innosight.
At this churn rate, it’s expected that 50% of the S&P 500 could turnover between 2018-2027.
For established companies, this is a sign of the times. Between the rapid acceleration in the speed of innovation and continuously falling barriers to market entry, the traditional corporate world finds itself playing defense.
For investors and startups, this is an interesting prospect to consider, as disruption now appears to be the status quo. Could the next big company to dominate global markets be found in someone’s garage in India today?
If you like this post, find hundreds of charts
like this in our new book “Signals”:
#4: ESG is the New Status Quo
The investment universe has reached an interesting tipping point.
Historically, performance was all the mattered to most investors—but going forward, considering ESG criteria (environment, social, and governance) is expected to become a default component of investment strategy as well.
By the year 2030, it’s expected that a whopping 95% of all assets will incorporate ESG factors.
While this still seems far away, it’s clear that change is already happening in the investment sphere. As you can see in the following graphic, the percentage of ESG assets has already been rising by trillions of dollars per year globally:
If you think this is a powerful trend now, wait until Millennials and Gen Z investors sink in their teeth. Both generations show a higher interest in sustainable investing, and both are already more likely to incorporate ESG factors into existing portfolios.
Companies are getting in front of the ESG investing trend, as well.
In 2011, just 20% of companies on the S&P 500 provided sustainability reports to investors. In 2019, that percentage rose to 90%—and with the world’s biggest asset managers already on board with ESG, there’s pressure for that to hit 100% in the coming years.
#5: Stock Market Concentration
In the last 40 years, the U.S. market has never been so concentrated as it is now.
The top five stocks in the S&P 500 have historically made up less than 15% of the market capitalization of the index, but this year the percentage has skyrocketed to 23%.
Not surprisingly, it’s the same companies—led by Apple and Microsoft—that propelled market performance the previous year.
Looking back at the top five companies in the S&P 500 over time helps reveal an important component of this signal, which is that it’s only a recent phenomenon for tech stocks to dominate the market so heavily.
#6: Central Banks: Between a Rock and a Hard Place
Since the financial crisis, central banks have found themselves to be in a tricky situation.
As interest rates close in on the zero bound, their usual toolkit of conventional policy options has dried up. Traditionally, lowering rates has encouraged borrowing and spending to prop up the economy, but once rates get ultra-low this effect disappears or even reverses.
The pandemic has forced the hand of central banks to act in less conventional ways.
Quantitative easing (QE)—first used extensively by the Federal Reserve and European Central Bank after the financial crisis—has now become the go-to tool for central banks. By buying long-term securities on the open market, the goal is to increase money supply and encourage lending and investment.
In Japan, where QE has been a mainstay since the late-1990s, the Bank of Japan now owns 80% of ETF assets and roughly 8% of the domestic equity market.
As banks “print money” to buy more assets, their balance sheets rise concurrently. This year, the Fed has already added over $3.5 trillion to the U.S. money supply (M2) as a result of the COVID-19 crisis, and there’s still likely much more to be done.
Regardless of how the monetary policy experiment turns out, it’s clear that this and many of the other aforementioned signals will be key drivers for the future of markets and investing.
If you like this post, find hundreds of charts
like this in our new book “Signals”:
Mapped: GDP per Capita Worldwide
GDP per capita is one of the best measures of a country’s standard of living. This map showcases the GDP per capita in every country globally.
Mapped: Visualizing GDP per Capita Worldwide
View the high-resolution of the infographic by clicking here.
GDP per capita has steadily risen globally over time, and in tandem, the standard of living worldwide has increased immensely.
This map using data from the IMF shows the GDP per capita (nominal) of nearly every country and territory in the world.
GDP per capita is one of the best measures of a country’s wealth as it provides an understanding of how each country’s citizens live on average, showing a representation of the quantity of goods and services created per person.
The Standard of Living Over Time
Looking at history, our standard of living has increased drastically. According to Our World in Data, from 1820 to 2018, the average global GDP per capita increased by almost 15x.
Literacy rates, access to vaccines, and basic education have also improved our quality of life, while things like child mortality rates and poverty have all decreased.
For example, in 1990, 1.9 billion people lived in extreme poverty, which was 36% of the world’s population at the time. Over the last 30 years, the number has been steadily decreasing — by 2030, an estimated 479 million people will be living in extreme poverty, which according to UN population estimates, will represent only 6% of the population.
That said, economic inequality between different regions is still prevalent. In fact, the richest country today (in terms of nominal GDP per capita), Luxembourg, is over 471x more wealthy than the poorest, Burundi.
Here’s a look at the 10 countries with the highest GDP per capita in 2021:
However, not all citizens in Luxembourg are extremely wealthy. In fact:
- 29% of people spend over 40% of their income on housing costs
- 31% would be at risk of falling into poverty if they had to forgo 3 months of income
The cost of living is expensive in Luxembourg — but the standard of living in terms of goods and services produced is the highest in the world. Additionally, only 4% of the population reports low life satisfaction.
Emerging Economies and Developing Countries
Although we have never lived in a more prosperous period, and poverty rates have been declining overall, this year global extreme poverty rose for the first time in over two decades.
About 120 million additional people are living in poverty as a result of the pandemic, with the total expected to rise to about 150 million by the end of 2021.
Many of the poorest countries in the world are also considered Least Developed Countries (LDCs) by the UN. In these countries, more than 75% of the population live below the poverty line.
Here’s a look at the 10 countries with the lowest GDP per capita:
Life in these countries offers a stark contrast compared to the top 10. Here’s a glance at the quality of life in the poorest country, Burundi:
- 80% of the population works in agriculture
- 1 in 3 Burundians are in need of urgent humanitarian assistance
- Average households spend up to two-thirds of their income on food
However, many of the world’s poorest countries can also be classified as emerging markets with immense economic potential in the future.
In fact, China has seen the opportunity in emerging economies. Their confidence in these regions is best exemplified in the Belt and Road initiative which has funneled massive investments into infrastructure projects across multiple African countries.
Continually Raising the Bar
Prosperity is a very recent reality only characterizing the last couple hundred years. In pre-modern societies, the average person was living in conditions that would be considered extreme poverty by today’s standards.
Overall, the standard of living for everyone today is immensely improved compared to even recent history, and some countries will be experiencing rapid economic growth in the future.
GDP per Capita in 2021: Full Dataset
|Country||GDP per Capita (Nominal, 2021, USD)|
|🇺🇸 United States||$66,144|
|Hong Kong SAR||$47,990|
|United Arab Emirates||$32,686|
|Trinidad and Tobago||$16,622|
|Saint Kitts and Nevis||$16,491|
|Antigua and Barbuda||$14,748|
|Saint Vincent and the Grenadines||$7,401|
|Bosnia and Herzegovina||$6,536|
|West Bank and Gaza||$3,060|
|Papua New Guinea||$2,596|
|Republic of Congo||$2,271|
|São Tomé and Príncipe||$2,133|
|Central African Republic||$522|
|Democratic Republic of the Congo||$478|
Editor’s note: Readers have rightly pointed out that Monaco is one of the world’s richest countries in GDP per capita (nominal) terms. This is true, but the IMF dataset excludes Monaco and lists it as “No data” each year. As a result, it is excluded from the visualization(s) above.
Ranked: The Most Innovative Companies in 2021
In today’s fast-paced market, companies have to be innovative constantly. Here’s a look at the top 50 most innovative companies in 2021.
Ranked: the Top 50 Most Innovative Companies in 2021
This year has been rife with pandemic-induced changes that have shifted corporate priorities—and yet, innovation has remained a top concern among corporations worldwide.
Using data from the annual ranking done by Boston Consulting Group (BCG) using a poll of 1,600 global innovation professionals, this graphic ranks the top 50 most innovative companies in 2021.
We’ll dig into a few of the leading companies, along with their innovative practices, below.
Most Innovative Companies: A Breakdown of the Leaderboard
To create the top 50 innovative company ranking, BCG uses four variables:
- Global “Mindshare”: The number of votes from all innovation executives.
- Industry Peer Review: The number of votes from executives in a company’s industry.
- Industry Disruption: A diversity index to measure votes across industries.
- Value Creation: Total share return.
For the second year in a row, Apple claims the top spot on this list. Here’s a look at the full ranking for 2021:
|Company||Industry||HQ||Change from 2020|
|3||Amazon||Consumer Goods||🇺🇸 U.S.||--|
|5||Tesla||Transport & Energy||🇺🇸 U.S.||+6|
|6||Samsung||Technology||🇰🇷 South Korea||-1|
|9||Sony||Consumer Goods||🇯🇵 Japan||--|
|12||LG Electronics||Consumer Goods||🇰🇷 South Korea||+6|
|14||Alibaba||Consumer Goods||🇨🇳 China||-7|
|17||Cisco Systems||Technology||🇺🇸 U.S.||-5|
|18||Target||Consumer Goods||🇺🇸 U.S.||+4|
|19||HP Inc.||Technology||🇺🇸 U.S.||-4|
|20||Johnson & Johnson||Healthcare||🇺🇸 U.S.||+6|
|21||Toyota||Transport & Energy||🇯🇵 Japan||+20|
|23||Walmart||Consumer Goods||🇺🇸 U.S.||-10|
|24||Nike||Consumer Goods||🇺🇸 U.S.||-8|
|25||Lenovo||Technology||🇭🇰 Hong Kong SAR||Return|
|26||Tencent||Consumer Goods||🇨🇳 China||-12|
|27||Procter & Gamble||Consumer Goods||🇺🇸 U.S.||+12|
|28||Coca-Cola||Consumer Goods||🇺🇸 U.S.||+20|
|29||Abbott Labs||Healthcare||🇺🇸 U.S.||New|
|30||Bosch||Transport & Energy||🇩🇪 Germany||+3|
|32||Ikea||Consumer Goods||🇳🇱 Netherlands||Return|
|33||Fast Retailing||Consumer Goods||🇯🇵 Japan||Return|
|34||Adidas||Consumer Goods||🇩🇪 Germany||Return|
|35||Merck & Co.||Healthcare||🇺🇸 U.S.||Return|
|37||Ebay||Consumer Goods||🇺🇸 U.S.||Return|
|38||PepsiCo||Consumer Goods||🇺🇸 U.S.||Return|
|39||Hyundai||Transport & Energy||🇰🇷 South Korea||Return|
|41||Inditex||Consumer Goods||🇪🇸 Spain||Return|
|44||Disney||Media & Telecomms||🇺🇸 U.S.||Return|
|45||Mitsubishi||Transport & Energy||🇯🇵 Japan||New|
|46||Comcast||Media & Telecomms||🇺🇸 U.S.||New|
|47||GE||Transport & Energy||🇺🇸 U.S.||Return|
One company worth touching on is Pfizer, a returnee from previous years that ranked 10th in this year’s ranking. It’s no surprise that Pfizer made the list, considering its instrumental role in the fight against COVID-19. In partnership with BioNTech, Pfizer produced a COVID-19 vaccine in less than a year. This is impressive considering that, historically, vaccine development could take up to a decade to complete.
Pfizer is just one of four COVID-19 vaccine producers to appear on the list this year—Moderna, Johnson & Johnson, and AstraZeneca also made the cut.
Meanwhile, in a completely different industry, Toyota snagged the 21st spot on this year’s list, up 20 places compared to the rankings in the previous year. This massive jump can be signified by the company’s recent $400 million investment into a company set to build flying electric cars.
While we often think of R&D and innovation as being synonymous, the former is just one innovation technique that’s helped companies earn a spot on the list. Other companies have innovated in different ways, like streamlining processes to increase efficiency.
For instance, in 2021, Coca-Cola performed an analysis of their beverage portfolio and ended up cutting their brand list in half, from 400 to 200 global brands. This ability to pare down and pivot could be a reason behind its 20 rank increase from 2020.
Innovation Creates Value
As this year’s ranking indicates, innovation comes in many forms. But, while there’s no one-size-fits-all approach, there is one fairly consistent innovation trend—the link between innovation and value.
In fact, according to historical data from BCG, the correlation between value and innovation has grown even stronger over the last two decades.
For example, in 2020, a portfolio that was theoretically invested in BCG’s most innovative companies would have performed 17% better than the MSCI World Index—which wasn’t the case back in 2005.
And yet, despite innovation’s value, many companies can’t reap the benefits that innovation offers because they aren’t ready to scale their innovative practices.
The Innovation Readiness Gap
BCG uses several metrics to gauge a company’s “innovation readiness,” such as the strength of its talent and culture, its organization ecosystems, and its ability to track performance.
According to BCG’s analysis, only 20% of companies surveyed were ready to scale on innovation.
What’s holding companies back from reaching their innovation potential? The most significant gap seems to be in what BCG calls innovation practices—things like project management or the ability to execute an idea that’s both efficient and consistent with an overarching strategy.
To overcome this obstacle, BCG says companies need to foster a “one-team mentality” to increase interdepartmental collaboration and align team incentives, so everyone is working towards the same goal.
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