Mid-year 2021 stock market outlook | Business


In the first half of 2021, the US economy grew faster than almost everyone expected. Speed ​​can be exhilarating, but it can also be dangerous. In our view, the overall economic situation remains healthy and will likely support strong earnings growth and additional market gains.

But the pace of reopening is also creating new uncertainties: supply chains are stressed, labor shortages have arisen, inflation is rising – at least temporarily – and asset prices appear expensive by compared to historical figures.

Markets are always looking to the future; the next step will be quick with its share of opportunities, but also new risks to navigate. The US economy has surprised almost everyone on the upside as it accelerates – thanks to vaccinations, reopenings and record stimulus measures. The growth rate of the U.S. economy may have peaked in the second quarter of 2021, but there is still plenty of momentum to extend above-average growth through 2022.

Despite the recovery’s natural challenges, the recovery still seems capable of holding some positive surprises, and ultimately we may have our best year of real GDP growth since the early 1980s.

While higher taxes and more regulation are likely to come, extraordinary support from the Federal Reserve (Fed) and over $ 5,000 billion in fiscal stimulus so far (with more to come) should continue to support the stock market and the economy for the remainder of 2021. Keep in mind, however, that after a large gain from the lows of March 23, 2020, choppy action in the second year historically difficult of a bull market would be perfectly normal.

As for bonds, it has been a historically difficult year as yields jumped earlier this year. If the economy continued to improve, the door would be open for stocks to continue to perform well, but we will still appreciate the important role of bonds in a portfolio as a source of income and as a potential diversifier during the downturns. stock declines.

The first half has been good for investors. While the road ahead may bring more gains in the second half, it could be a bumpy race. As always, sound financial advice can be more important than ever in helping you navigate the environment and travel miles to reach your long-term financial goals.

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