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2021 Mid-Year Market Outlook: Peak or Pause?

2021 Mid-Year Market Outlook: Peak or Pause?

| July 01, 2021

As a result of the pandemic, the U.S. economy and corporate earnings essentially went from a depression-like bust to a wartime-like boom in the span of a year.

Companies cut operations to the bone amid the early phase of the pandemic, then, amid record-breaking monetary/fiscal stimulus, the economy quickly found its footing. The question as we head toward the second half of the year is whether we’re facing a long-lasting boom, a boom-settle, or a boom-bust scenario. At this point, we lean toward the boom-settle scenario, in part because we may be facing another peak in the growth rate for both the economy and corporate earnings (which does not mean growth itself is peaking, just the rate of change). In the second quarter of 2020, U.S. gross domestic product (GDP) shrank by -31.4% on a quarter-over quarter annualized rate. That was followed by the eye-popping initial rebound to 33.4% in the third quarter of 2020, then more moderate growth of 4.3% in the fourth quarter of 2020 and 6.4% in the first quarter of 2021.