While we may have turned the page on 2020, the challenges and uncertainties of the old year have followed us into the new year – the coronavirus continues to ravage our country and we still don’t know what party will control the US Senate, and as a result, what U.S. fiscal policy might look like in 2021.
That said, at the risk of sounding pollyannaish, and in no way seeking to minimize the ongoing suffering caused by the coronavirus, we are very optimistic on the outlook for our country and our economy as we move into the new year. The most important datapoint supporting an optimistic worldview is progress on the COVID-19 vaccination front; we can see the light at the end of the pandemic tunnel. Beyond that, there is exceptionally supportive monetary policy, home prices at record levels (but without the excess supply that marked the housing bubble of the late 2000s), an elevated consumer savings rate, record levels of cash on corporate balance sheets and low interest rates, which support spending, keep borrowing costs low and flatter risk assets, particularly stocks.
As the economy reopens in 2021, we expect to see a surge in consumer and corporate spending. It is quite possible our economy grows at 5% in 2021, a rate of growth we haven’t seen since the early 1980s. We do see better days ahead. While we all likely want to move on from 2020, it might be worth considering for a moment what our country faced and came through last year – a global pandemic, civil unrest, the most divisive election in a hundred years or more, and the sharpest economic downturn since the Great Depression. As we said often in 2020, hard times come, but hard times go. Here’s to better times.
Tagged: weekly wire, market perspectives, Tim Holland, COVID-19, 2021 economy