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The Outlooks newsletter explores financial news and trends that could affect trusts and investments. With a threefold focus on economic, equity and fixed income forecasts, each issue highlights positive takeaways, potential negative warning signs, and unknowns.
September 2021 Outlook
Fresh off the disappointing August jobs report, is a good time to point out that for as strong as the economic growth has been year-to-date, much of the U.S. economic data has been coming in below expectations since mid-June. Since that time, the Citi Economic Surprise Index for the U.S. (which has a positive value when economic data is stronger than expected and a negative value when it is worse than expected) has dropped by more than 100 points (+56.6 to -54.0).
Inflation is still viewed by the Fed as transitory, or temporary, and there is no doubt we experienced inflation during the second quarter. Nominal GDP during Q2 grew at an annualized pace of 13.0% - an enormous amount historically. However, inflation accounted for roughly 6.5% of the gain, causing real GDP to register growth at 6.5% (missing estimates by roughly 2%).
As we close the book on the second quarter, there seems to be little debate the economy is on solid footing. If anything, a debate could center on whether the overall economy will end up getting “too hot.” For example, first-quarter GDP came in at 6.4% and the Atlanta Fed currently estimates second-quarter GDP to be 8.3%. Though they were both influenced by prior stimulus from the government, these numbers still stand out as impressive, and not just because we don’t typically see such strong back-to-back readings. Here, we’ve seen significant strength even in the face of economic headwinds such as chip shortages, slower-than-anticipated job growth and spikes in the prices of raw materials causing slowdowns, among other things.
With the availability of vaccines having increased throughout the year, there has been an expectation that furloughed/laid off employees would come rushing back into the workforce. Initially, this seemed to be confirmed in the March nonfarm payroll report with a 916k increase in jobs that crushed expectations. Unfortunately, since then we have seen two disappointing job reports. During April, there was an expectation that nearly one million workers would be added back to the labor force, yet we only saw a gain of 266k. More recently in May, we missed job-growth expectations by 116k (675k expected vs 559k actual).
This material has been prepared for information purposes only. Factual materials obtained from sources believed to be reliable but cannot be guaranteed.
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The CARES Act is a 2 trillion dollar coronavirus economic stimulus bill that President Trump signed into law on March 27, 2020. It is designed to offer relief for businesses, families, and individuals who have been negatively impacted by COVID-19. From direct payments to unemployment to student loan relief and more, the bill is aimed at combating the economic ramifications of the coronavirus. Let’s take a closer look at some of the highlights here.