Study Reveals Majority of U.S. Cities Are Strong Enough to Survive a Recession

By February 15, 2020No Comments

According to a recent study from Moody’s Investor Service, an American provider of financial analysis services, most large cities in the United States are financially strong enough to weather a recession. The research concludes that 23 of the 25 largest U.S. cities are well prepared for an economic downturn should the country’s current economic prosperity drop in the future.

The analysis looked at four main factors to determine how prepared each city was for a recession: fiscal volatility, reserve coverage, financial flexibility, and pension risk. Below are the results of the study:

  • 6 U.S. cities are strongly prepared to survive an economic downturn (Boston, Charlotte, Denver, San Antonio, San Francisco, and Seattle)
  • 17 of 25 cities are well or adequately prepared
  • Only 2 cities are underprepared (Chicago and Detroit)

One reason why most U.S. cities are well suited to handle a recession is due to their local governments, who used the broad economic expansion of the past decade to strengthen their finances. The report also highlights that each city has been able to keep its debt and related fixed costs at manageable levels. The analysis further shows that the cities have built solid reserves over the past 10 years, with median reserves as a percentage of revenue standing at 32.4% in 2018, up from 24.3% in 2007.

Overall Prosperity of the United States

Another reason why the United States’ cities are well-positioned to handle a recession is because of the current prosperity of the overall American economy. According to CNN Business, America’s housing market has come back to life in the final months of the year and promises to boost the economy in 2020. Low mortgage rates, a strong labor market with rising wages, and unemployment hitting at a 50-year low are all underpinning the solid fundamentals that will help real estate next year.

Over the next several years, the economy is forecasted to grow slowly but steadily while unemployment and inflation are expected to remain low, according to the most recent forecast released at the Federal Open Market Committee meeting on December 11, 2019.

Moreover, the Bureau of Labor Statistics publishes an occupational outlook each decade. It expects total employment to increase by 8.9 million jobs between 2018 and 2028.

A Wealth of Opportunities

The United States’ strong and stable economy is just one of many reasons why high-net-worth-individuals (“HNWIs”) move to the country. Unlike the middle class, wealthy citizens have sufficient means to pursue moving themselves, their families, and their wealth to different countries with more favorable opportunities, thus putting their earnings to better value, such as sending their children to a top university.

For example, many South African’s are seeking ways to protect his or her wealth is by investing abroad in a currency that enjoys less volatility (erratic and unpredictable fluctuations) and more stability, such as the American dollar, which is often looked favorably as a ‘shelter’ among South African investors. This is because the US dollar is considered a safe-haven investment. It is one of the countries least likely to default on its debt and with such an enormous economy as a backer, it will provide stability to investors – particularly international investors.

The EB-5 Program

One of the best values for HNWIs pursuing the American Dream is the U.S. EB-5 Immigrant Investor Program. The Immigrant Investor Program, also known as “EB-5,” was created by the United States Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by immigrant investors.

There are no language skills, business, or special training experience required to invest in the EB-5 program. The only requirements are to make the required capital investment into a new commercial enterprise located within the United States with legally sourced funds and create 10 American jobs

There are many advantages to investing in an EB-5 project but one thing it does offer is protection for investor’s hard-earned money. If one were to invest in a project in the US, the money invested would be in US dollars, effectively hedging currency risk. Further, at the end of the investment term, one would be entitled to receive the investment back in US dollars.

More than solely protecting wealth, investors will also be able to obtain residency through EB-5, provided the investor funds the investment legally and creates the required jobs. In fact, America may also be a place where such an investor may consider retiring to or setting up a home or business to further enjoy the same rights as any American citizen, aside from voting and working in a government job.

Overall, the program gives one the opportunity to take control of their destiny as the next turn comes.

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