Ranked: The Best and Worst State Economies
View the high resolution version of today’s graphic by clicking here.
On a global scale, the U.S. economy is massive at close to $19 trillion in size.
However, the United States is also the sum of its parts. America represents the union of 50 states and other jurisdictions such as D.C., and all of these state-level economies have their own unique problems to overcome, drivers of growth, and local resources that factor into their prosperity.
How can we compare these state economies on an even playing field?
Ranked: State Economies
Using absolute numbers, it’s hard to directly compare California ($2.75 trillion GDP, 39.5 million people) to a state like Vermont ($33 billion, 0.6 million people). By leveling the playing field, we can get an idea of how states contrast in terms of relative economic strength that companies and workers would better recognize.
Today’s infographic uses 27 metrics from WalletHub to rank state economies. These metrics are grouped into three major categories, which are evenly weighted:
1. Economic Activity: GDP growth, startup activity, exports per capita, and three other metrics
2. Economic Health: Labor force changes, median household income, unemployment, and 13 other metrics
3. Innovation Potential: Entrepreneurial activity, R&D investment, patents per capita, and three other metrics
Note: the full methodology with all 27 factors can be found here.
Here’s how the rankings shake down, for all 50 state economies and D.C.:
|Overall||State||Total Score||Economic Activity||Economic Health||Innovation Potential|
|5||District of Columbia||67.1||3||6||13|
Topping the list for overall score were the states of Washington, California, and Utah, and the first place state in each major category includes Washington (Economic Activity), Utah (Economic Health), and Massachusetts (Innovation Potential).
Case in Point
Looking at statistics and scoring methodologies alone can be a bit esoteric, so let’s look at some individual cases to see some contrast.
Utah (Rank: #3)
Utah consistently ranks as one of the top states for business, in the country, as well as a top state for job growth and employment. It’s also pretty unique in that it has a fairly diversified economy, with major sectors in the tourism, agriculture, tech, manufacturing, finance, energy, and mining industries.
Utah has a higher median household income ($65,977), and a blistering 3.4% employment growth rate.
Florida (Rank: #22)
Using this methodology, Florida falls somewhere in the middle of the rankings. The good news is the state has good employment growth (2.9%) and a myriad of thriving industries like aerospace. The bad news? Florida has the second-highest level of poverty in the union at 19%, and it also has a lower median household income ($50,860) than the national average.
Maine (Rank: #45)
Economic activity is sluggish in the country’s most northeastern state. With an aging population, slow employment growth (0.8%), and a number of lost manufacturing jobs over the last 15 years, the state is trying to rebound. Maine isn’t helped by having one of the highest tax burdens for its citizens and businesses in the country, either.
The Periodic Table of Commodity Returns (2021 Edition)
Which commodity had the best returns in 2020? From gold to oil, we show how commodity price performance stacks up over the last decade.
The Periodic Table of Commodity Returns (2011-2020)
Being a commodity investor can feel like riding a roller coaster.
Take silver. Typically known for sharp, idiosyncratic price movements, it faced double-digit declines in the first half of the decade, falling over 35% in just 2013 alone. By contrast, it jumped over 47% in 2020. Similarly, oil, corn, and others witnessed either steep declines or rapid gains.
The above graphic from U.S. Global Investors traces 10 years of commodity price performance, highlighting 14 different commodities and their annual ranking over the years.
Commodity Price Performance, From Best to Worst
Which commodities were the top performers in 2020?
The aforementioned silver tripled its returns year-over-year, climbing 47.9% in 2020. In July, the metal actually experienced its strongest month since 1979.
Along with silver, at least seven other commodities had stronger returns than the S&P 500 in 2020, which closed off the year with 16.3% gains. This included copper (26.0%), palladium (25.9%), gold (25.1%) and corn (24.8%).
Interestingly, copper prices moved in an unconventional pattern compared to gold in 2020. Often, investors rush to gold in uncertain economic climates, while sectors such as construction and manufacturing—which both rely heavily on copper—tend to decline. Instead, both copper and gold saw their prices rise in conjunction.
Nowadays, copper is also a vital material in electric vehicles (EVs), with recent demand for EVs also influencing the price of copper.
As investors flocked to safety, silver’s price reached heights not seen since 2010.
The massive scale of monetary and fiscal stimulus led to inflationary fears, also boosting the price of silver. How does this compare to its returns over the last decade?
In 2013, silver crashed over 35% as confidence grew in global markets. By contrast, in 2016, the Brexit referendum stirred uncertainty in global markets. Investors allocated money in silver, and prices shifted upwards.
As Gold as the Hills
Like silver, market uncertainty has historically boosted the price of gold.
What else contributed to gold’s rise?
- U.S. debt continues to climb, pushing down confidence in the U.S. dollar
- A weaker U.S. dollar makes gold cheaper for other countries to buy
- Low interest rates kept the returns of other safe haven assets low, making gold more attractive by comparison
Here’s how the price of gold has changed in recent years.
Gold faced its steepest recent declines in 2013, when the Federal Reserve bank discussed tapering down its quantitative easing program in light of economic recovery.
Hitting the Brakes On Oil
Oil suffered the worst commodity price performance in 2020, with -20.5% returns.
For the first time in history, oil prices went negative as demand plummeted. To limit its oversupply, oil producers shrunk investment, closed wells, and turned off valves. Unfortunately, many companies still faced bankruptcies. By November, 45 oil producers had proceeded with bankruptcy filings year-to-date.
This stood in stark contrast to 2019, when prices soared 34.5%.
As is custom for oil, prices see-sawed over the decade. In 2016 and 2019, it witnessed gains of over 30%. However, like 2020, in 2014 it saw huge losses due to an oversupply of global petroleum.
In 2020, total production cuts hit 7.2 million barrels a day in December, equal to 7% of global demand, in response to COVID-19.
Why Gold Mining Stocks Outperform Gold in Bull Markets
Gold mining stocks outpace gold returns in bull markets, but how? With higher gold prices, miners get ahead thanks to operating leverage.
Why Gold Mining Stocks Outperform Gold in Bull Markets
Gold is highly revered for its great returns and resilience during economic downturns, but during gold bull markets there’s something that regularly provides even greater returns: the ownership of gold mining stocks.
Over the past 20 years, gold mining stocks have outperformed the price of gold bullion in bull markets, offering what can be seen as a leveraged play on gold’s price appreciation.
While gold miners offer more potential upside, they also have higher volatility and greater downside during dips, making market timing and strong hands all the more important.
This infographic comes to us from Sprott and compares the returns of gold stocks and gold bullion in bull markets. It also explains how gold stocks outperform thanks to profit expansion, and shows why there might be more upside for gold miners to come.
How Operating Leverage Benefits Gold Mining Companies
During the 2000-2011 gold bull market, the price of physical gold rose 550%. While you might think that number is hard to beat, over the same period of time gold mining equities (represented by the NYSE Arca Gold Miners Index) returned more than 690%.
In the current gold bull market which started in 2015, gold mining stocks are up more than 182%, more than doubling gold bullion’s 78% returns.
This outperformance in bull markets is largely due to how gold mining companies use their operating leverage to maximize profits, resulting in their share prices appreciating.
Breaking Down Gold Mining Costs and Profits
As a gold mining company mines and produces gold, the gold is sold on the market fairly quickly to avoid the risk of gold’s price depreciating.
When the price of gold rises, miners immediately start to see greater profits from selling their ounces on the market. While the costs to mine gold also rise in bull markets, they rise less and at a slower rate.
The result of this is profit expansion: when operationally efficient gold mining companies are able to capture larger profits, resulting in increased operating and free cash flow.
Breakdown of Barrick Gold’s Profit per Ounce of Gold
|Year||All-in Sustaining Costs/oz (in USD)||Realized Gold Price/oz (in USD)||Profit/oz (in USD)|
During the current gold bull run which started in 2015, Barrick Gold’s average realized price per troy ounce of gold increased by 50%, while their all-in sustaining costs per troy ounce only went up by 18%.
This has resulted in the company increasing their profit per ounce of gold sold by a staggering 134% over the past six years.
Making the Most of Golden Times
While higher profit margins during bull markets are great, it’s up to the individual company to ensure the extra cash is being used prudently to efficiently support their operations.
Bull markets don’t last forever, and gold miners must use these prosperous times to strengthen their balance sheets, reward shareholders, and reinvest into projects which will provide future value and returns.
Dividend-paying gold stocks increase dividends to reward loyal shareholders, with the average dividend increase of top gold mining stocks in a bull market often doubling.
Over the decades, companies have gotten better at making the most of bull markets in order to be well-guarded for when gold prices stop appreciating, and eventually start declining.
Why Gold Mining Stocks May Still Be Undervalued
Even if gold mining stocks have already seen impressive returns over the past five years, there are some technical indicators which point to them still being undervalued compared to other equities and gold bullion.
- The top 10 gold mining companies have seen their earnings per share estimates almost triple in the past two years.
- The top 20 S&P 500 companies have seen around a -15% decline in their earnings per share estimates.
Along with having better earnings per share compared to the top U.S. equities, gold mining stocks may also be undervalued compared to gold bullion.
The gold mining stocks to gold bullion ratio is at historically low levels after having dropped more than 60% following the 2008 financial crisis. While gold bullion is increasingly seen as a safe haven asset for investors, gold miners are still overlooked despite their strong technicals.
Gold and Gold Miners’ Role in the Future Economy
As money printing has been the Federal Reserve’s main answer to an increasingly volatile economic climate, gold and its producers are set to play a crucial role in helping investors preserve their wealth.
Gold has yet again outperformed just about every other asset class in 2020, and gold miners offer even greater returns for those willing to manage the additional risk they present.
Gold mining stocks are much more volatile compared to gold bullion, and have a variety of additional risks dependent on their company structure, jurisdiction of operations, and operational efficiency. But for investors who are looking for exceptional returns in gold bull markets, they can be an alluring option.
Technology2 months ago
50 Years of Gaming History, by Revenue Stream (1970-2020)
Healthcare1 month ago
Tracking COVID-19 Vaccines Around the World
Markets1 month ago
The Year in Review: 2020 in 20 Visualizations
Technology4 weeks ago
Switch to Success: 20 Years of Nintendo Console Sales
Misc1 month ago
Chart: A Global Look at How People Spend Their Time
Markets2 weeks ago
Prediction Consensus: What the Experts See Coming in 2021
Misc3 weeks ago
Visualizing the U.S. Population by Race
Precious Metals3 weeks ago
How Every Asset Class, Currency, and S&P 500 Sector Performed in 2020