Friday, December 11, 2020
US GDP Forecast
Continued progress in the response to COVID-19, including further stimulus, will be the key to sustaining the recovery. We forecast 4–4.5% US gross domestic product (GDP) growth in 2021. For all our 2021 market insights and economic forecasts, read the new LPL Research Outlook 2021: Powering Forward.
Stocks open firmly lower. US equities are on track for weekly losses after rallying in four of the last five weeks.
- Stalemate on fiscal stimulus negotiations continues to be the primary overhang, while concerns over a government shutdown are creeping higher.
- European markets are under pressure in midday trading.
- Asian stocks were mixed, with China the underperformer.
Is inflation looming? Both headline and “core” inflation readings (excluding food and energy) for November came in slightly higher than the Bloomberg-surveyed economists’ consensus. Inflation is likely to pick up as the economy improves and may run a little hotter in 2021 than we’ve seen in recent years. We discuss the risk of a substantial inflation surprise in the LPL Research blog.
GPS covers global market trends. December Global Portfolio Strategy (GPS) offers LPL Research’s insights on equity asset classes and sectors, fixed income, commodities, and what’s trending around the world. It includes a review of November and updated views:
- Upgraded industrial metals view to positive
- Downgraded precious metals view to neutral
Technical update. A pullback in the S&P 500 Index is continuing for a third day this morning, but the index continues to have substantial support in the range from 3550–3600. The British pound/US dollar cross is reacting negatively to a seemingly increased likelihood of a “no-deal Brexit,” moving off multiyear highs from just last week. This morning the pair is still in an uptrend and above support at 1.30. We maintain an upward bias consistent with our broadly negative view of the US dollar, but would note the dollar is oversold and could rally in the very short term.
COVID-19 news. The United States reported 215,000 new cases on Thursday, the second highest daily increase during the pandemic, though up only 2.6% week over week (source: COVID Tracking Project).
- While daily cases are setting a new record, the week-over-week increase in cases may be showing early signs of slowing as new restrictions take effect.
- Cases in Western Europe as a whole are still falling, but cases in Germany have hit a new high.
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