The US economy is surging and life is returning to normal. Consumers have healthy balance sheets and inflation is a hot topic. Companies in hard-hit industries are even talking about having a difficult time finding staff. The Fed seems to be seeing a different picture of the economy though and has no intention of tapering pandemic era stimulus until it’s clear that the economy has returned to maximum employment and inflation is running above 2%.
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 believe that we’re approaching a year since the US economy shut down due to COVID. Vaccines continue to roll out though and people are ready to have fun. Strong demand is putting pressure on COVID-impacted supply chains and potentially creating inflationary forces.
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: Retailers reported strong quarters last week showing that the US consumer remains resilient despite high unemployment. A new wave of Covid could slow the economy back down but vaccines are almost here. It will be interesting to see what behaviors have been permanently altered by the pandemic and which ones will return to the way that they were. Business travel is one thing that may be permanently changed.
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Succinct Summary: Most parts of the economy have normalized and the economic winners are booming. Technology, cloud service and e-commerce are leading the way and other industries are surging as well. Financial service firms focused on M&A advisory, trading and restructuring are seeing strong business. The housing market is also on fire with new home sales up 32% y/y. This week’s election and a renewed wave of COVID could dampen activity, but for now, the economy is doing remarkably well. COVID may have led to structurally higher productivity.
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Succinct Summary: The economy has had a strong but incomplete recovery. The worst seems to be over but there’s still a long way to go. For many industries, this looks like a K shaped recovery.
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Succinct Summary: There were a lot of major data points about the economy last week but the biggest news of all seemed to be just how well tech companies did despite the massive economic dislocation. In a quarter where GDP fell at a 33% annualized rate, Apple managed to grow revenue by 11%! Stimulus probably played some role in tech companies’ strong performance, but beyond the stimulus is the fact that COVID has pushed everyone to spend even more time at home and on the internet. The behavioral shifts appear to be long-lasting too. 20 years after the dot com bubble, the internet is still not done reshaping society.
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