• Market Crumbs

Beaches, Reggae, Bobsledding And Now The World's Best-performing Stock Market

Photo via Sébastien Jermer on Unsplash

There are 195 countries in the world today. Jamaica is ranked in the bottom one-third in a handful of major statistics. It's the world's 137th most populous country. Its economy, as measured by gross domestic product, is ranked marginally higher at 134th in the world. Its size, measured by land area, is ranked 160th. So how did Jamaica manage to become home to the world's best-performing stock market over the last twelve months and five years? 

The Jamaica Stock Exchange, or JSE as it's known, beat out 94 other exchanges tracked by Bloomberg over the past twelve months and five years with total returns of 35% and 600%, respectively.

All it took was adherence to a strict International Monetary Fund program to help shore up its finances and a creative marketing campaign from the country's central bank, the Bank of Jamaica. 

The country's debt reached 147% of GDP in 2013, with the cost of of servicing it alone eating away at a third of the country’s fiscal budget. That same year, Jamaica entered into a $2 billion IMF financing agreement. Just like in Cool Runnings, they pulled off a great Jamaican underdog story. They graduated from the IMF program ahead of schedule and just last month exited a subsequent “stand-by” arrangement. The program has helped Jamaica run one of the world’s largest budget surpluses, decrease debt to GDP below 100% for the first time in nearly two decades and send unemployment to a record low.

Former IMF Managing Director Christine Lagarde praised Jamaica's list of accomplishments, saying “Through two programs, two different administrations with very strong commitment, you have managed to actually create jobs, to reduce the unemployment level to the lowest ever, you’ve reduced debt by 50 percentage points of gross domestic product (GDP), you’ve managed to stabilize inflation and you’ve managed to accumulate reserves.”

Last month, S&P upgraded the country's credit rating saying “the country will be able to maintain its growth momentum, with modest GDP growth." The Jamaican government is also paving the way for the Bank of Jamaica to have operational independence for the first time. This will enable them to pursue policies to achieve low, stable and predictable inflation, which has been an issue throughout the country's history.

Besides the country's strengthening fundamentals, the Bank of Jamaica is running a creative marketing campaign. Like the New York Fed, the Bank of Jamaica is using comics to teach people about monetary policy, even using a Mitsubishi Lancer with a Jamaican flag as the logo. They're also using musicians to record catchy reggae songs explaining inflation targeting, monetary policy and consistent GDP growth. For example, one song's lyrics are "Low and stable inflation is to the economy what the bass-line is to reggae music."

So even though Jamaica's very own Bob Marley passed away nearly 30 years ago, the Bank of Jamaica is teaching a new generation about monetary policy using the island's favorite music genre. Perhaps Fed Chairman Jerome Powell, who is looking for a speechwriter of his own, could enlist the help of the Bank of Jamaica's songwriters.

Leftover Crumbs

  • So who will be the first to pay you to trade stocks? As predicted last week, Fidelity finally succumbed to pressure and cut commissions to zero for stocks, ETFs and options transactions. Maybe Fidelity waited the longest to eliminate commissions to determine how it wanted to troll its competitors. On their website, they stated "your cash automatically goes into a money market mutual fund, earning a higher rate than the competition."

  • The Jetsons meet reality. Fresh off the heels of announcing an investment in Virgin Galactic, Boeing announced it will partner with Porsche to study the market potential of electric vertical take-off and landing (eVTOL) vehicles and develop and test a prototype. Porsche Consulting forecasts the urban air mobility market will gain traction after 2025 and "transport passengers more quickly and efficiently than current conventional means of terrestrial transport, at a lower cost and with greater flexibility."

  • Will they at least get some coffee? General Motors is pushing the United Auto Workers to agree to “around-the-clock" negotiations in an attempt to end the UAW's strike, which has now lasted for 25 days. GM's VP of labor relations wrote a letter saying "Your members and our employees’ lives are being disrupted, and they deserve our commitment to getting any remaining issues resolved as quickly as possible." In a separate development, GM CEO Mary Barra secretly met with the the UAW's top executives on Wednesday in an attempt to make progress on the negotiations.

  • Will they pitch it as a tech company that operates a driving range? Popular golf center operator Topgolf is reportedly in discussions with investment banks regarding an IPO as early as next year. Topgolf, which uses microchips in golf balls to track shots across a variety of games, has locations in the U.S., Britain and Australia. Topgolf has attracted people who aren't golfers as a result of its various interactive games and food, drinks and even brunch.  

  • Many Americans can't afford one house. According to the National Association of Realtors, demand for vacation homes is increasing as mortgage interest rates remain subdued. Vacation home counties, defined as counties where at least 20% of homes are for seasonal residents, account for 6.6% of the 3,141 counties in the U.S. In the five years through 2018, the average sales price of homes in vacation home counties increased 36% versus 31% for homes nationally. The largest increases were registered in counties in Pennsylvania, Wisconsin and Massachusetts.