U.S. Economy on Solid Ground, Coronavirus remains Top Threat

economy-crisis

In the event of an epidemic like the one caused by the COVID-19 coronavirus, the economy can be disrupted. U.S. firms can have difficulty filling orders when it disrupts the global supply of goods. Additionally, it can restrict the supply of labor in affected areas, thereby reducing the supply of US products and services.

It will grow at its fastest pace in decades and outperform most of its major peers in the coming quarters, a Reuters poll showed, but another COVID-19 surge will be the biggest risk, analysts said.

An uptick in economic activity was predicted as a result of the $1.9 trillion pandemic relief package that was already passed and the increase in U.S. spending. The proposed infrastructure plan of President Joe Biden is expected to cost more than $2 trillion, based on a poll conducted from April 16-20.

World economies are expected to expand on average 6.2% this year, the strongest growth forecast since polling began nearly two years ago. If realized, it would be the fastest growth since 1984.

IMF’s latest forecast of 6.4% was somewhat more optimistic than last month’s consensus, but about 15% of 105 economists will predict the economy will grow at least 7% this year. Ranges of forecasts have risen compared with last month.

In response to a second question, nearly 70%, or 39 out of 56, said the biggest risk was a recurrence of Coronavirus.

BMO Capital Markets’ Sal Guatieri said, “We increased our growth forecast because of additional fiscal stimulus and the speedy vaccination program.”

Accordingly, the U.S. economy is smoking. But another wave of cases would put our forecast at risk. For now, we assume aggressive restrictions will not be imposed again.”

In a poll of 52 economists, more than half of them said tapering the Fed’s monthly asset purchases would begin in the first quarter next year. A dozen stated they’ll be back this year, while 12 said they’ll be back later.

“The Federal Reserve attaches policy decisions to employment and inflation outcomes, which is normal. However, the likelihood of meeting key targets depends highly on the economy reopening and returning to normal, said Stephen Gallagher, chief U.S. economist at Societe Generale.

The message should strengthen after mid-year when they are more likely to speak about tapering. Tapering of asset purchases should be possible in early 2022 under this strategy.”

Disclosures

Securities offered through Securities America, Inc., member FINRA (www.finra.org)/SIPC/www.sipc.org), a separate entity. Lee Michael Murphy is licensed with the CaliforniaDepartment of Insurance, License 0H18660. Lee Michael Murphy is an Investment Advisor Representative with Securities America Advisors, a registered investment advisor The Free Retiree, Securities America Advisors, and Securities America Incorporated are separate entities. Career advisor Sergio Patterson, attorney Matt McElroy are not affiliated with Securities America Advisors or Securities America Incorporated. Securities America Advisors, Securities America Incorporated, and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation.

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