Market Projections | May 20, 2021

Q2 2021 Investment Outlook: Is the Stimulus Endgame a Phoenix or an Icarus?

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.

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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. 

What does the Outlook cover?

In the Q2 2021 Investment Outlook you'll see our projected trends for:

  • The U.S.
  • Canada
  • The eurozone
  • The UK
  • Japan 
  • China and other emerging markets

We cover:

  • GDP growth
  • Inflation
  • Policy rate
  • Currency
  • Equity valuations

We also look at trends in asset classes including equities and fixed income. 

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Segal Marco Advisors provides consulting advice on asset allocation, investment strategy, manager searches, performance measurement and related issues. The information and opinions herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Segal Marco Advisors’ R2 Blog and the data and analysis herein is intended for general education only and not as investment advice. It is not intended for use as a basis for investment decisions, nor should it be construed as advice designed to meet the needs of any particular investor. Please contact Segal Marco Advisors or another qualified investment professional for advice regarding the evaluation of any specific information, opinion, advice, or other content. Of course, on all matters involving legal interpretations and regulatory issues, investors should consult legal counsel.

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