Are We Heading for a Global Recession in 2021? We Don’t Know but Be Prepared

American Airlines
American Airlines

As the world starts to emerge from COVID-19 lockdowns, the question financial experts are asking is how will the global economy respond? Much of the talk in 2020 focused on recessions. By all measures, it’s almost a case of when not if the world will suffer at least some sort of economic hardship. That sentiment is clear when we look at the latest data coming out of the UK. Recent reports suggest that a double-dip recession is on the cards across the pond. A January 15 report from the Office for National Statistics detailed that output for November 2020 was down 2.6% on the previous month. 

Closer to home, the US economy is also suffering from another surge in COVID-19 cases. Top economist at JPMorgan Chase, Michael Feroli, told investors that economic activity in the US could drop by $50 billion in the first three months of 2021. That would translate into a 1% drop in annualized gross economic output. By those markers alone, the outlook for 2021 is fairly bleak. However, the global economy is more than what goes on in the US and the UK. Indeed, China’s economy grew by 2.6% last year with economic output increasing by 6.5% in the final quarter of 2020. 

The Only Certainty is Uncertainty 

Despite examples of growth, the reality is that much of the world is struggling. The International Monetary Fund (IMF) stated in October 2020 that continued lockdowns will hamper a return to economic stability. Although there is hope, the IMF believes there will be a “long ascent back to pre-pandemic levels.” Interestingly, the Organization for Economic Co-operation and Development (OECD) has a different view. In a report released in mid-January, the organization outlined its “hope for a brighter future.” With vaccines apparently removing “uncertainty,” the OECD believes the global economy will recover by the end of 2021. 

That’s a bold prediction and one that doesn’t seem to follow recent events. The Great Recession lasted from 2007 to 2009. Following that, we saw a mini-recession between 2018 and 2019. In both instances, recovery was a relative term. Some economies thrived; others never fully returned to normal. What all of this suggests is that nothing is certain. The US is suffering while China is thriving. The IMF believes one thing, the OCED another. As an investor or someone wanting to take control of their finances, the only certainty at this point is uncertainty. As such, you need to embrace that. 

Financial Flexibility is the Only Viable Strategy in 2021 

No single strategy can help you stay ahead of the curve. Yes, you can track economic reports and the financial markets. However, you also need to have a flexible solution. Binary options are that solution. By using Nadex™ Binary Options, you can  speculate on the price movements of underlying assets. Because you’re not investing directly in the asset (i.e. buying shares or gold etc.), you only have to state “yes” the price will be higher or “no” it won’t be. This offers a much greater degree of flexibility which, in an unstable market, is important. 

This is the type of analysis that analysts are currently performing. They’re hedging their bets because we’ve not seen this type of economic crisis for decades. Unlike the Great Recession where we knew the reason for the banking crisis and, therefore, its solution, we can’t predict the path of a virus. We can try but it’s not an exact science. Right now, economies are at the mercy of nature. This isn’t a manmade crisis and that makes it hard to guess what’s going to happen. Therefore, the best thing we can do is be prepared to pivot in any direction and roll with the punches. That requires constant analysis, the right financial moves, and a willingness to change at a moment’s notice.