2<\/sup><\/strong><\/p>\n\n\n\n_________________________________________________________________________<\/p>\n\n\n\n
I have no experience in public health matters. But what I do\nknow is that there is an inverse relationship between economic restrictions and\neconomic output (GDP). More restrictions mean less output, and vice versa. From\nan economic forecast perspective, then, it\u2019s critical to watch how the winter\nunfolds with the pandemic and state-by-state restrictions. It will be key in\ndetermining if we do in fact experience a double-dip recession.<\/p>\n\n\n\n
There are a\nfew other factors in play. For one, the first quarter has generally been a soft\nspot early in economic recoveries. In 8 of the last 11 business cycle\nrecoveries, there has been a Q1 setback before the expansion continued. So,\nthere\u2019s cyclical weakness to consider here. <\/p>\n\n\n\n
Second,\neconomic uncertainty in the U.S. remains at or near record levels. Economic\nuncertainty can weigh on economic growth, in a few ways \u2013 businesses tend to delay\nor pause investing in major projects, consumers \u2018hunker down\u2019 and favor saving\nover spending in the holiday season, and fiscal stimulus becomes less effective\nwhen businesses opt to hoard cash rather than deploy it. In short, confidence\nand positive sentiment matter quite a bit, and we\u2019re approaching a final leg in\nthe pandemic that stands to challenge both. <\/p>\n\n\n\n
Finally, there\u2019s the U.S. dollar. The dollar continues to\nweaken relative to developed world currencies, most likely a result of high\ndeficit spending and additional debt accumulated to battle the pandemic. The Wall Street Journal <\/em>dollar index, which\nmeasures the dollar against a basket of other key world currencies, fell last\nweek to its lowest level since April 2018. With more fiscal stimulus likely on\nthe way, the dollar may have further to fall, which for the economy could\nultimately mean higher inflation and higher interest rates in the medium-term. <\/p>\n\n\n\nIn my view, there are many forces trying to push back on\nthis economic recovery, and again, these next three to six months will be critical.\nBut there are also positive forces at work. Early fourth quarter economic data has\nbeen holding up quite well \u2013 the Institute for Supply Management\u2019s (ISM)\nNovember survey showed construction spending rise to its second-highest level\non record, and other readings regarding durable goods orders, home sales, and\nconsumer spending showed resilience in October. The Atlanta Federal Reserve\u2019s\nmodel for predicting GDP, called GDPNow, is predicting an 11.1% annualized\ngrowth rate for Q4, which is a strong improvement from the 2.2% rate predicted\njust a month ago. <\/p>\n\n\n\n
At the same time, areas of the economy like factory\nemployment, hospitality, and personal incomes continue to struggle, and there\nare signs consumer spending is softening: data shows that U.S. consumers spent\nan average of just below $312 on holiday-related purchases from Thanksgiving to\nCyber Monday, which is down 14% from spending in 2019. The number of in-store\nshoppers plummeted 37% from a year earlier on Black Friday, though online\nshoppers rose 8% on the same day.2<\/sup> It\u2019s a mixed bag.<\/p>\n\n\n\nBottom Line for\nInvestors<\/strong><\/p>\n\n\n\nHere\u2019s my message to investors: even though we\u2019re wading\ninto a critical, uncertain period to finish this year and to start the new one,\nremember that investing should<\/em> look beyond the short-term to focus on what\nthe economy may look like in the next six to twelve months<\/em>. <\/p>\n\n\n\nAnd, if we\u2019re talking six to twelve months, that means\nlooking past any potential backsliding in Q1 2021, and instead focusing on the\npossibility of strong growth by next summer or next fall. If you think a\nvaccine rollout will reduce the pandemic uncertainty and allow the economy to\nfunction normally again \u2013 which I do \u2013 then now is the time to position for\nthat possibility. Don\u2019t worry too much about what happens economically in the\nnext three months, in my view.<\/p>\n\n\n\n
Instead of letting short-term volatility influence your investment decisions, I recommend focusing on key data points and economic indicators that could positively impact your investments in the long-term. To help you do this, I am offering all readers our Just-Released January 2020 Stock Market Outlook Report<\/a>. <\/strong>
This report looks at several factors that are producing optimism right now and contains some of our key forecasts to consider such as:<\/p>\n\n\n\n- A look at the current Covid-19 situation and its impacts<\/em><\/li>
- U.S. returns expectations for 2021<\/em><\/li>
- Update on U.S. fiscal stimulus<\/em><\/li>
- A look at U.S. earnings and GDP growth rates in 2020 and what to expect for 2021<\/em><\/li>
- Zacks Rank S&P 500 Sector Picks<\/em><\/li>
- What produces 2021 optimism? <\/em><\/li>
- And much more<\/em><\/li><\/ul>\n\n\n\n
\n\n\n\nIf you have $500,000 or more to invest and want to\nlearn more about these forecasts, click on the link below to get your free\nreport today!
<\/p>\n","protected":false},"excerpt":{"rendered":"
Mitch analyzes the signals that indicate whether the economy will grow or shrink in the coming months<\/p>\n","protected":false},"author":3,"featured_media":8874,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-9119","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9119","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9119"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9119\/revisions"}],"predecessor-version":[{"id":10493,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9119\/revisions\/10493"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9119"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9119"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9119"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}