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March 2, 2021
Fiscal policy relief and the prospective reopening of the economy have been important upward drivers for U.S. equities over the last several months. The anticipated third fiscal relief bill should further boost consumption. This boost, combined with strong production and housing increases, has many economists scrambling to increase first-quarter and full-year 2021 growth estimates. The most significant risk to this outsized GDP growth is the inflationary implications of higher-than-expected demand and relatively lean inventories. Assuming supply catches up to demand quickly, any inflation this year should be transitory. Intense global competition and productivity-enhancing capital investment are vital for preventing longer-term inflation.
Japan should also experience positive first-quarter growth thanks to a smaller-than-expected drop in sales and strong corporate and capital spending. The country’s production and export-driven economy is well-positioned for a sustained rebound. It should benefit from continued growth in the U.S. and China. Of all the major countries, China appears the strongest right now. Its expected GDP growth for 2021 is 8%, although this number could decrease if Chinese consumers don’t fully re-engage. Despite all this positive news, not all regions are improving. Europe is experiencing a slight recession. A second-half recovery is possible for this region if vaccination rates increase as expected in the second quarter.
Asset markets continue to face more tailwinds than headwinds. However, the recent upward shift in the yield curve bears watching. At this point, the higher rates primarily confirm a cyclical recovery and vindicate the aggressive policy response. We are closely monitoring the ultimate impact on inflationary expectations and the subsequent monetary policy response, given current market valuations.
For more insights, contact a Cerity Partners advisor or visit the thought leadership section of ceritypartners.com.
Cerity Partners LLC (“Cerity Partners”) is an SEC-registered investment adviser with offices in California, Colorado, Illinois, Ohio, Massachusetts, Michigan, New York and Texas. Registration of an Investment Adviser does not imply any level of skill or training. This commentary is limited to general information about Cerity Partners’ services and its financial market outlook, which may not be suitable for everyone. The information contained herein should not be construed as personalized investment, tax, or legal advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this commentary will come to pass. Investing in the financial markets involves risk, including the risk of loss of the principal amount invested; and may not be appropriate for everyone. The information presented is subject to change without notice and should not be considered as an offer to sell or a solicitation of an offer to buy any security. All information is deemed reliable but is not guaranteed. For information pertaining to the registration status of Cerity Partners, please contact us or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). For additional information about Cerity Partners, including fees and services, send for our disclosure statement as set forth on Form CRS and ADV Part 2A using the contact information herein. Please read the disclosure statement carefully before you invest or send money.
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