Can a global pop star’s concert tour boost a nation’s economic fortunes? Does a negative occurrence, like a natural disaster, dash them? Some financial commentators Fisher Investments UK reviews suggest so, making it seem like yet another variable investors must weigh when trying to assess economic fundamentals. But our research suggests such one-time events tend to have a limited economic impact.
A common argument in financial publications Fisher Investments UK reviews: a singular event (e.g., a concert or regional sporting tournament) produces a major economic boost. Fans attending the performance spend big not only on tickets, but also lodging, restaurants, local retailers, etc. Though this event benefits certain industries and businesses, we don’t think it creates new spending. Rather, it reallocates economic activity from one area to another. For instance, someone may spend on concert tickets instead of taking a holiday trip to the beach or purchasing a new sofa.
Moreover, the associated spending sounds big in a vacuum, but it pales in comparison to broader economic output. For example, Fisher Investments UK observed some analysts estimate pop star Taylor Swift’s summertime concert tour would bring a £1 billion boost to the UK economy.[i] Yet the arts, entertainment and recreation subsector contributed 0.00 percentage point to June gross domestic product (GDP, a government-produced measure of economic output).[ii] Retail trade and hospitality, also purported beneficiaries, each saw output fall -1.0% on the month.[iii] For all the headlines a one-time event may garner, our research suggests the longer-term economic impact is immaterial.
The flipside is also true: isolated negatives like natural disasters don’t automatically roil an economy or markets. Some studies Fisher Investments UK reviews highlight the economic activity lost due to a natural disaster – and the associated economic damage. Take the 2021 summertime floods in Germany, which damaged infrastructure, destroyed many homes and led to over 200 deaths.[iv] One insurer estimated the economic cost to be £31 billion.[v]
We don’t dismiss the devastating personal and social toll from natural disasters. But from a strictly macroeconomic perspective, their effect is similar to a one-time economically additive event. The German floods may have taken some businesses offline, but the disaster didn’t destroy economic activity. Rather, it delayed or redirected it. Moreover, rebuilding efforts – which drive a temporary boost in economic output – tend to offset a natural disaster’s disruptions over time, according to Fisher Investments UK’s reviews of economic history.
Singular events create winners and losers, so don’t overrate their impact either way. Financial headlines we follow tend to focus on one outcome – e.g., funds spent at pubs during the European Football Championship, those lost due to factories going offline after a big storm, the price tag tied to damaged infrastructure. But we think reality is more nuanced.
Consider the broken window fallacy, a principle advanced by 19th century French economist and philosopher Frédéric Bastiat.[vi] Bastiat used a parable of a storeowner whose son breaks a window. This outcome results in business for the town’s glazier, who replaces the window. But, as Bastiat notes, the six francs paid to the glazier means the storeowner has six fewer francs to spend elsewhere (e.g., on new shoes or a book). The broken window meant the cobbler or bookstore owner missed out on business. It therefore hampered growth, since the storeowner could have had a window and something else. But the broken window itself isn’t a total loss from an economy-wide point of view; it is more a reallocation and an impact on future growth.
In our opinion, this example illustrates how one-time events, whether positive or destructive, tend to redirect money. Some entity – a business, industry or economy – benefits whilst another misses out. We think the overall economic impact, therefore, is likely to prove insignificant. Equities see this clearly, in Fisher Investments UK’s review – hence, they rarely react materially. By understanding headline-grabbing singular occurrences’ effect tends to be more about tradeoffs than net creation or destruction, we think investors can avoid overrating their impact.
Interested in planning for your retirement? Get our ongoing insights, starting with a copy of 7 Secrets of High Net Worth Investors.
Follow the latest market news and updates from Fisher Investments UK:
This document constitutes the general views of Fisher Investments UK and should not be regarded as personalised investment or tax advice or a reflection of client performance. No assurances are made that Fisher Investments UK will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. Nothing herein is intended to be a recommendation or forecast of market conditions. Rather, it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. In addition, no assurances are made regarding the accuracy of any assumptions made in any illustrations herein. Fisher Investments Europe Limited, trading as Fisher Investments UK, is authorised and regulated by the UK Financial Conduct Authority (FCA Number 191609) and is registered in England (Company Number 3850593). Fisher Investments Europe Limited has its registered office at: Level 18, One Canada Square, Canary Wharf, London, E14 5AX, United Kingdom. Investment management services are provided by Fisher Investments UK’s parent company, Fisher Asset Management, LLC, trading as Fisher Investments, which is established in the US and regulated by the US Securities and Exchange Commission.
Investment management services are provided by Fisher Investments UK’s parent company, Fisher Asset Management, LLC, trading as Fisher Investments, which is established in the US and regulated by the US Securities and Exchange Commission. Investing in financial markets involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance neither guarantees nor reliably indicates future performance. The value of investments and the income from them will fluctuate with world financial markets and international currency exchange rates.
[i] “Will Taylor Swift Provide a £1bn Boost to the UK Economy?” Heather Stewart, The Guardian, 17/5/2024.
[ii] Source: Office for National Statistics, as of 15/8/2024.
[iii] Ibid.
[iv] “Natural Disasters Cost $280 Billion in 2021: German Firm,” Elizabeth Schumacher, Deutsche Welle, 10/1/2022.
[v] Ibid.
[vi] “That Which Is Seen, and That Which Is Not Seen,” Claude Frédéric Bastiat, 25/11/2022. Accessed via Mises Institute.