2021 Economic Outlook: Insights from Dr. Mark Schug

Economist Mark Schug, Ph.D., Professor Emeritus at the University of Wisconsin-Milwaukee, joined Lightspeed last month to present a live webinar recapping 2020’s unprecedented fiscal year and its economic implications for 2021.

Detailed insights included market predictions regarding ongoing impacts of COVID-19, general economic uncertainty and the recent growth in the GDP.

GDP
The real domestic gross product (GDP) increased at an annual rate of 33.1% in the third quarter of 2020, according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 31.3%.

The increase in real GDP reflected increases in personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment and residential fixed investment. The increase in PCE reflected increases in services (led by healthcare, food service and accommodations) and goods (led by motor vehicles, clothing and footwear). The increase in private inventory investment primarily reflected an increase in retail trade (led by motor vehicle dealers).

The 2020 Quarter 4 real GDP will be released on January 28, 2021.

2020 Recession
Most recessions are caused by unexpected shifts in Aggregate Demand (AG) or Short Term Aggregate Supply (SRAS), temporarily sinking the economy below its full-employment potential. The shifts in AG and SRAS are generally the result of supply shocks, miscalculation by business decision-makers or policy errors.

In contrast to past recessions, this recession was caused by government mandates requiring businesses to close their operations to combat the COVID-19 virus. The effects on output and employment were immediate and massive — in February 2020, the unemployment rate was 3.5%; by April, it was 14.7%, a record high since the Great Depression. As of November 2020, the unemployment rate had fallen to 6.7%.

DOW
U.S. stocks ended 2020 strong, with the Dow Jones Industrial Average crossing 30,000 for the first time. Many factors are to credit for the strong finish — expectations regarding the vaccine for COVID-19, the 2020 election passing and businesses recovering from the COVID-19 lockdown are just a few.

Slow Growth in 2021?
Many forces are pointing to slow growth in 2021. Political uncertainty is one. A new president creates unknowns: What about taxes? Regulations? Anti-private sector attitudes?

Consumer confidence rate is another. On November 24, the Conference Board Consumer Confidence Index decreased 5.3 Points in November after remaining flat in October. The Present Situation Index — based on consumers’ assessment of current business and labor market conditions — decreased slightly from 106.2 to 105.9. The Expectations Index — based on consumers’ short-term outlook for income, business and labor market conditions — declined from 98.2 in October to 89.5 in November.

2021 Market Outlook
While the consensus expectations for 2021 show strong GDP growth, some economists estimate that it could take two years to fully recover. However, investors appear optimistic regarding the strength of the economy in the years ahead, cheered on by progress in vaccine development.

Some Wall Street analysts expect equities earnings to rebound to a record high in 2021. As of mid-November, 80% of companies in the S&P 500 had reported Quarter 3 gains that were above expectations.

“Big tech will likely continue to do well, while the travel sector is still slow to recover,” suggested Schug.

For more professional trading resources, view our active trading blog, and register now for our next live webinar. 

Active Trading with Lightspeed
Lightspeed provides professional traders with all the tools required to help them find success in stock trading, and we have been developing and honing our active trader platform to offer an optimal user experience. With the intuitive interface layouts and institutional quality stock and options scanners, we aim to help traders reach their goals, no matter what their strategy is. We also offer our clients some of the lowest trading fees in the industry.

For more information on a professional trading platform with Lightspeed, please call us at 1-888-577-3123, request a demo, or open an account.

Data, information, and material (“content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance.