The economy is booming and companies are expecting robust growth in the second half of 2021 and 2022. Travel is starting to rebound and cities are coming back to life. Stimulus has left consumers with a tremendous amount of liquidity and we are spending. Institutional investors are increasingly concerned about inflationary pressures.
It’s hard to remember that there’s still a pandemic going on. Vaccination rates have increased and it looks like we may be on the cusp of a roaring 20s. Consumers are healthy and eager to make up for lost time–booking travel and eating out. Offices will probably re-open by the end of summer but working from home is likely to remain an option.
Markets went haywire last week thanks (so the story goes) to some retail traders in a Reddit forum led by a man named Roaring Kitty. It was hard to pay attention to much of anything else in capital markets, but it was also a busy week for earnings. Industrial companies said that demand was “very, very, very strong” and there was an abundance of commentary on price pressures. Jerome Powell isn’t worried though. Game on!
Succinct Summary: The US got a new President last week, and the new administration is pledging more stimulus. The economy continues to chug along though and there are signs of tight capacity in some segments, especially transportation networks. Could additional stimulus lead to higher-than-expected inflation?
The Year in Review: 2020 was an unprecedented year and The Transcript covered the economy throughout all of its twists and turns. Even though China was battling Covid in 2019, no one really knew what was in store for all of us in 2020. Technology, capital markets, and housing were three industries that boomed. While the stimulus was integral, the economic hero of 2020 was the US consumer. Optimism is high that 2021 will be a more normal year.
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Succinct Summary: The modern economy has never experienced economic carnage on the scale of COVID19. US GDP is forecast to fall by 30-40% while unemployment is likely to rise to 20-30%. What matters though, is how long it lasts. A 30% rate of decline in production for a quarter is different from a 30% decline for a whole year. As public attention seems to turn from the virus to the economy, debate is on whether we will see a V-shaped recovery or not. There are lots of reasons why we are unlikely to see such a rapid recovery but there are also glimmers of economic hope. Still, the path of the economy seems to pale in comparison to the importance of the path of humanity.
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Succinct Summary: It is quite clear by now that we are in a recession. The hope is that this is a different kind of recession and that we will be out of it quickly. But that depends on the trajectory of containing the virus. The good news is that things in China look better after containing the virus.
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Succinct Summary: Worries about the impact of the Coronavirus are at the top of mind for management teams. The positive thing is activity is picking up in China and the impact is not expected to be long-term. Short -term worries persist, but elections may be the bigger long term risk to US markets in 2020.
Succinct Summary: Companies are now growing increasingly worried about the short-term impact of the Coronavirus. Those with exposure to China are issuing wider-than-normal guidance. Despite this, most are cautiously optimistic on overall growth.
Succinct Summary: It’s hard not to be happy about the economy. The consumer is strong and business sentiment has turned positive. Recession fears have abated thanks to the actions of central banks and a trade truce with China. Markets are feeling optimistic.