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US economy seems poised to grow

By Janet Fox Last Updated Friday, June 4, 2021 10:52 am

Despite the ongoing threat of COVID-19, it’s important to remember the tremendous progress the US economy has made in its recovery so far:

  • The US economy has created more than 12 million jobs since April 2020—more than half the number of jobs lost during the spring lockdown—and has brought down the unemployment rate from 14.7% in April to 6.7% in November.
  • Holiday shopping was up a better-than-expected 3% year over year according to MasterCard data. And it shouldn’t be a surprise that a 49% increase in online sales was the big driver. This growth is impressive when we remember how different the world looked in late 2019 when businesses were fully open without restrictions, shoppers freely visited brick-and-mortar stores, and unemployment was near record lows.
  • The manufacturing sector has staged a strong recovery. The Institute for Supply Management (ISM) manufacturing index in December tied for its second highest reading in 15 years and has registered above 50—the dividing line between expansion and contraction—for seven straight months.

The economy lost some momentum as 2020 ended with more rapid COVID-19 spread and renewed restrictions. Still, the US economy appears poised to grow through the end of the pandemic, bolstered by the $900 billion fiscal stimulus package passed December 27, 2020, which provides much-needed aid for small businesses, consumers, schools, and the healthcare system. US gross domestic product (GDP) is expected to grow 4.6% annualized in the fourth quarter of 2020, followed by 2.5% in the first quarter of 2021 (source: Bloomberg).

A better economic backdrop may mean better corporate earnings. Analysts’ consensus estimates for S&P 500 Index company profits have been rising steadily in recent months (source: FactSet) amid the improving economic outlook. S&P 500 companies are expected to return to 2019 profit levels in 2021—a remarkable achievement if realized.

Possible bumps ahead

Thanks to the remarkable work of medical researchers and doctors, the end of the pandemic is approaching, and the outlook for the economy and stock market appears promising. But the road ahead may not be smooth. The vaccine rollout is still in its early stages and has significant logistical challenges. US-China tensions aren’t going away anytime soon. Higher interest rates and a pickup in inflation could put pressure on stock market valuations at some point. Divisiveness in America is at an extreme. And following the Georgia Senate elections, tax increases may be likely—probably in 2022.

One thing 2020 has taught us as investors is the importance of sticking to a long-term investment plan. That may be easier said than done when volatility arrives—and we had our fair share of that in 2020. Investors who stayed with their plans in 2020 benefited as volatility presented opportunities.

Related story: Thriving in a Volatile Market

Janet Fox is President of ACH Investment Group, Inc., in Raleigh, North Carolina.  ACH Investment Group, Inc. and LPL Financial are separately owned entities.

The opinions in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

No strategy assures success or protects against loss.  All investing involves risk including loss of principal.

Filed Under: Money Return to Senior Daily Home Page

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About Janet Fox

Janet Fox is President of ACH Investment Group, Inc. Incorporated in 1991, ACH Investment Group today serves clients with more than $100 million in brokerage and advisory assets. Janet offers financial and estate planning securities and investment services through LPL Financial, the nation’s largest independent broker/dealer (as reported in Financial Planning Magazine, 1996-2018, based on total revenue). She is an instructor for the Osher Lifelong Learning Institute at North Carolina State University, leading seminars on Retirement Planning. Since 1985, and prior to her work at ACH Investment Group, Janet was a financial consultant with both national and regional financial services companies. Janet is passionate about spreading her knowledge of the need for proper financial planning throughout one’s lifetime.

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