Monday Musings: April 12, 2021

Apr 12, 2021


Public Trust Credit Team
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Gale force or a slight breeze: how strong will economic tailwinds be?

According to Bloomberg’s April data, the consensus for economic growth as measured by real GDP is currently 6.2% in 2021, 4.1% in 2022, and 2.4% in 2023. These readings compare favorably with the March consensus estimates of 5.5% in 2021, 4.0% in 2022, and 2,4% in 2023. In the current month’s data, the 76 responses range from a high of 7.6% to a low of 2.2%; only two estimates fell below 4% suggesting they are outliers. The point of sharing this data is to say that economic growth will obviously be strong this year with trend growth returning in later years. Even the Federal Reserve has said as much with FOMC estimates of 6.5% in 2021, 3.3% in 2022, and 2.2% in 2023. The bullish estimates for the current year are not exactly borne of speculation; commodity prices are increasing, suggesting that business activity is ramping up while supporting the view that inflation will grow and unemployment will decline. While we know that we will see significant economic growth, the question for many investors is just how strong the economic picture will be. For fixed-income investors, the focus will be on inflation and monetary policy; inflation running too hot could catch the Fed off guard, prompting potential rate hikes and declining bond prices.
All comments and discussion presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. The information presented should not be used in making any investment decisions. This material is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.

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