Shifting Perspectives: The World’s Top Financial Centers
Financial centers are catalysts for global growth, with tremendous economic influence.
Historically, the rise of nations has coincided with the emergence of robust financial hubs. From London towering in the 19th century, to New York City gaining dominance in the 20th century, broader economic shifts are at play.
Today’s chart uses data from the Duff & Phelps Global Regulatory Outlook 2020, and it highlights changing perceptions on the world’s financial centers.
In total, 240 senior financial executives were surveyed—we take a look at their responses, as well as key factors that could impact perspectives across the wider financial landscape.
Financial Hubs Today
In the below graphic, you can see the percentage of respondents that voted for each city as the world’s preeminent financial center:
The Status Quo
New York and London are perceived to be at the helm of the financial world today.
New York City is home to the two largest stock exchanges in the world—and altogether, U.S. stock markets account for an impressive 43% of global equities, valued at over $34 trillion. Of course, New York is also home to many of the world’s investment banks, hedge funds, private equity firms, and global credit rating agencies.
Across the pond, the London Stock Exchange has surpassed $5 trillion in market capitalization, and the city has been a global financial hub since the LSE was founded more than 200 years ago.
Together, the United States and the United Kingdom account for 40% of the world’s financial exports. But while New York City and London have a foothold on international finance, other key financial centers have also established themselves.
Rising in the East
Singapore, accounting for 2.1% of the respondents’ vote, is considered the best place to conduct business in the world.
Meanwhile, seventh-ranked Hong Kong is regarded highly for its separation of executive, judiciary, and legislative powers.
Despite ongoing protests—which have resulted in an estimated $4 billion outflow of funds to Singapore—it maintains its status as a vital financial hub globally.
Where are Financial Centers Heading?
A number of core financial hubs are anticipated to underpin the future of finance.
Although New York maintains the top spot, some executives surveyed believe that the top financial center could shift to Shanghai, Singapore, or Hong Kong.
Growth in Asian Hubs
According to survey results, 8.7% of respondents said Shanghai is predicted to be the next global financial hub by 2025. Shanghai houses the largest stock exchange in China, the Shanghai Stock Exchange (SSE), and the SSE Composite tracks the performance of over 1,600 listings with $4.9 trillion in combined market capitalization.
Meanwhile, Singapore accounted for 5.4% of the respondents’ vote. Exporting $27.2 billion in financial services annually, Singapore’s economy has grown at an average clip of 7.7.% per year since the country’s independence, one of the highest growth rates in the world.
The Impending Impact of Brexit
After four tumultuous years, Britain’s departure from Europe took place on January 31, 2020.
Despite a long-awaited victory for the Conservative government, many experts are saying that economic prospects for the region look dim.
We now know that the economy will be between 2—6% smaller in 10 years than it would otherwise have been.
– Ray Burrell, Professor at Brunel University
The UK financial sector could lose over $15 billion (£12B) due to Brexit, and falling investment in the private sector may lead to wage pressure and layoffs.
On the flip side, 51% of UK businesses said that Brexit will be beneficial to business conditions.
A New Paradigm
Although the global financial sector is primarily influenced today by New York City and London, it seems that perceptions are shifting.
While both of these cities will maintain their reputations as massive financial capitals going forward, it’s also clear that hubs such as Singapore, Hong Kong, and Shanghai will be providing some stiff competition for capital.
Mapped: The State of Small Business Recovery in America
Compared to January 2020, 34% of small businesses are currently closed. This map looks at the small business recovery rate in 50 metro areas.
Mapped: The State of Small Business Recovery in America
In the business news cycle, headlines are often dominated by large corporations, macroeconomic news, or government action.
While mom and pop might not always be in focus, collectively small businesses are a powerful and influential piece of the economy. In fact, 99.9% of all businesses in the U.S. qualify as small businesses, collectively employing almost half (47.3%) of the nation’s private workforce.
Unfortunately, they’ve also been one of the hardest-hit sectors of the economy amid the pandemic. From the CARES Act to the new budget proposal, billions of dollars have been allocated towards helping small businesses to get back on their feet.
Small Business Recovery in 50 Metro Areas
During the pandemic, many small businesses have either swiftly pivoted to survive, or struggled to stay afloat. This map pulls data from Opportunity Insights to examine the small business recovery rate in 50 metro areas across America.
So, has the situation improved since the last time we examined this data? The short answer is no—on a national scale, 34% of small businesses are closed compared to January 2020.
San Francisco is one of the most affected metro areas, with a 48% closure rate of small businesses. New York City has spiralled the most since the end of September 2020.
|U.S. Metro Area||% Change in # of|
Small Businesses Open
(As of Sep 25, 2020)
|% Change in # of|
Small Businesses Open
(As of Apr 23, 2021)
|7-month change (p.p.)|
|New York City||-21%||-42%||-21|
|Salt Lake City||-18%||-23%||-5|
Data as of Apr 23, 2021 and indexed to Jan 4-31, 2020.
On the flip side, Honolulu has seen the most improvement. As travel and tourism numbers into Hawaii have steadily risen up with lifted nationwide restrictions, there has been a 16 p.p. increase in open businesses compared to September 2020.
Road to a K-Shaped Recovery
As of April 25, 2021, nearly 42% of the U.S. population has received at least one dose of a COVID-19 vaccine. However, even with this rapid vaccine rollout, various segments of the economy aren’t recovering at the same pace.
Take for instance the stark difference between professional services and the leisure and hospitality sector. Though small business revenues in both segments have yet to return to pre-pandemic levels, the latter has much more catching up to do:
This uneven phenomena is known as a K-shaped recovery, where some industries see more improvement compared to others that stagnate in the aftermath of a recession.
The Entrepreneurial Spirit Endures
Despite these continued hardships, it appears that many Americans have not been deterred from starting their own businesses.
Many small businesses require an Employer Identification Number (EIN) which makes EIN applications a good proxy for business formation activity. Despite an initial dip in the early months of the pandemic, there has been a dramatic spike in EIN business applications.
Even in the face of a global pandemic, the perseverance of such metrics prove that the innovative American spirit is unwavering, and spells better days to come for small business recovery.
Pandemic Recovery: Have BEACH Stocks Bounced Back?
BEACH stocks—bookings, entertainment, airlines, cruises, and hotels—were pulverized at the beginning of the pandemic. Here’s how they’ve bounced back.
Pandemic Recovery: Have BEACH Stocks Bounced Back?
The travel and entertainment industries have had a volatile ride over the last year.
During the initial stages of the pandemic, when panic and uncertainty ran rife, BEACH stocks–booking, entertainment, airlines, cruises, and hotels—were left scrambling. Collectively, $332 billion in market cap washed away.
Now, it appears the tide might be turning for these companies, buoyed by vaccine breakthroughs and glimmers of hope for a return to normalcy.
This infographic looks at the growth in market cap value across BEACH stocks one year from when the WHO officially declared COVID-19 a pandemic.
Washing Back to Shore?
BEACH stocks have gained a collective $376 billion in market cap in the year since the pandemic was declared, with about half the companies trading at their respective all-time highs.
In fact, about 70% of BEACH stocks have actually outperformed the S&P 500, which returned 43.7% during the same period.
|Company||Ticker||Category||Market Cap: 03/11/20 ($B)||Market Cap: 03/11/21 ($B)||Change|
|Alaska Air Group||ALK||Airlines||5.7||8.1||42%|
|Delta Air Lines||DAL||Airlines||29.1||30.9||6%|
|Caesars Entertainment||CZR||Casino & Hotel||2.2||20.8||824%|
|Norwegian Cruise Lines||NCLH||Cruise & Casino||4.3||10.9||151%|
|Royal Caribbean Cruises||RCL||Cruise & Casino||10.8||22.4||108%|
|Carnival||CCL||Cruise & Casino||16.4||31.8||93%|
|Penn National Gaming||PENN||Entertainment & Live Events||2.6||20.4||661%|
|Six Flags||SIX||Entertainment & Live Events||1.7||4.1||142%|
|Live Nation||LYV||Entertainment & Live Events||10.8||19.3||79%|
|The Walt Disney Co||DIS||Entertainment & Live Events||201.2||357.1||77%|
|Cedar Fair||FUN||Entertainment & Live Events||1.8||2.8||57%|
|Choice Hotels International||CHH||Hotels||4.5||5.9||30%|
|Marriott Vacations Worldwide||VAC||Hotels & Resorts||3.8||7.7||103%|
|Vail Resorts||MTN||Hotels & Resorts||7.1||13.4||88%|
|Park Hotels & Resorts||PK||Hotels & Resorts||3.4||5.3||58%|
|Wyndham Hotels & Resorts||WH||Hotels & Resorts||4.2||6.4||51%|
|MGM Resorts International||MGM||Resorts & Casino||10.2||19.3||89%|
|Wynn Resorts||WYNN||Resorts & Casino||9.7||15.9||64%|
|Las Vegas Sands||LVS||Resorts & Casino||40.7||48.2||18%|
BEACH Stocks Leaders and Laggards
When dissecting this basket of stocks by industry, it’s clear that much of the recovery story is lopsided. One reason for this, despite the pandemic, is that there are more granular, idiosyncratic trends occurring within these sectors.
Let’s look at what’s propelling the leaders, and dragging down the laggards:
Leading: Online Betting
There’s reason to be bullish on gambling stocks. Since late 2018, some 20 states have legalized sports betting, with more expecting to follow. Relative to other areas, the pandemic has been kind to gambling stocks. Many of those with an online presence have witnessed a spike in traffic, as more people continue to flock towards online betting.
Within the BEACH stocks basket, Penn National Gaming and Caesars Entertainment are clear outliers, having grown an epic 661% and 823% respectively. In addition, the broader industry (measured by the BETZ ETF) has nearly doubled the performance of the S&P 500 since its inception.
The return to normalcy will be much more delayed for airlines. Global RPKs, an industry metric, are not expected to reach pre-pandemic levels until 2024.
Actions of insiders also seem to match this negative sentiment. Warren Buffett, once a staunch supporter of airlines, decided to call it quits during the pandemic—dumping his entire position.
U.S. airline executives have collectively been selling their stakes much more aggressively than in the last few years. To add insult to injury, there’s significant shorting of airline stocks as well. At a short interest of 11.6%, American Airlines is most heavily shorted BEACH stock.
In a year where social interactions and gatherings have largely disappeared, so too has much of the business activity for hotels. For instance, Hilton sales suffered a 58% decline year-over-year.
But even without the pandemic, the hotel industry had their work cut out for them, through a growing and formidable competitor in Airbnb. Airbnb can scale its network beyond what any hotel can. This is evident in its room count, which is greater than the largest hotels combined.
More Bumps On The Road Ahead?
The investing landscape today looks to be disconnected from reality, in part because of the forward-looking nature of markets. Even though things are dire today, there’s a belief that light exists at the end of the tunnel.
But the path to recovery isn’t quite so linear. When the dust settles, it’ll become more apparent which industries will “return to normal” and which have set out permanently on a new trajectory.
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