Market Projections | May 20, 2021
Let’s take the U.S. case on this question: according to Statista, the U.S. provided COVID-19-related stimulus equal to 26.5 percent of GDP as of March 31, 2021. This amounts to approximately $5.7 trillion, given that U.S. GDP in Q4 2019 was $21.7 trillion. If we take that same starting point and calculate GDP since then based upon the pre-pandemic trend (about 1 percent per quarter nominal growth), the value of GDP lost due to the pandemic over the next four quarters (through Q4 2020) relative to what would be suggested by the pre-pandemic trend totaled approximately $5.4T.
Conclusion? The fiscal stimulus almost exactly made up for the reduction in GDP off trend — and when the numbers come in for the first quarter of 2021, we would expect the stimulus will be slightly less than the GDP deficit. Does an amount of stimulus roughly equal to the magnitude of the reduction in GDP that arose out of the pandemic somehow create a new dynamic that would cause the economy to explode? Doubtful. The number to focus on isn’t that the GDP was up 8 percent from the second quarter of 2020 to the third, for example, but rather that it was 6 percent below where it would have been.
In the Q2 2021 Investment Outlook you'll see our projected trends for:
We also look at trends in asset classes including equities and fixed income.
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