Strong growth ahead? Stock/bond reactions.

[Lsbcal]

Here is my guess: we have a lot of debt, pension problems, state financing issues, etc. The most obvious solution is to grow the economy very strongly. In recent years strong growth did not come with a helping of inflation whcih was a surprise to many. So we will see more government spending to turbocharge growth and an attempt at getting mild inflation (3% or so). It's kind of happening now and will accelerate well beyond current government spending. Probably depends a lot on the coming elections, but no politics on this please.

Covid screwed up the strong growth but it will not be with us forever. At least not in a way to halt growth. I think government will take the Fed's request and step up the spending ... perhaps a lot. And for some years to come.

Stocks: the above argues for good stock performance even with a bit of inflation. Probably good for both growth and value stocks. Might get some near term extra bounce in value but I tend to go with the momentum which has been for growth stocks.

Bonds: put your guess here but I think rates will be managed to either stay low or very gradually increase. This is probably the consensus now. A very gradual increase will reduce bond yields that investors have enjoyed over recent decades but not destroy them. My current preference is to take the bond allocation and split it into a 30% broad stock allocation (like SP500) and low risk intermediate Treasuries.

Go ahead and place your views here. No snarky comments please. Agree or disagree? This thread is just for fun after all.

[RetireAge50]

The average S&P 500 return since I started investing about 30 years ago is 9.9%. I’m expecting/hoping for more of the same. Our portfolio is currently split 4 ways: Growth Stocks, Value Stocks, S&P 500, and Stable Value/CD’s. No bonds.

[38Chevy454]

I do agree that gov't spending is not likely to go down, and in fact may increase. The FED will adjust interest rates to keep inflation in check. Any increases in the federal reserve rate will have negative effect on bonds in short term. Not sure how fast an increase in rates will happen, it almost seems that rates are kind of an effect rather than a cause; they are adjusted after the economy such that they are more trailing. It is tough to find where to invest in the fixed income side, so I am staying high in equities for now. Of course that is all fine and dandy when stocks are going up and my higher allocation in stocks has paid off.


I am a believer in the market, and will stay with it. Has been good to me in past and I am confident it will treat me well going forward. I have high risk tolerance, and the volatility doesn't bother me or cause panic selling.

[chassis]

I saw an article in the past 4-6 weeks that suggested growth in 2021 will have a 4 handle. That is strong.

If you take today's level of economic output, and calculate what output should be on a per capita basis in say, Q4 2021 or Q2 2022, the government needs to do nearly nothing to achieve 4% growth, plus or minus.

Population and consumer spending do what they do, they grow. From where we are today until things "normalize" growth will be above trend. No magic from the government is needed, it's a gimme.

[street]

Some very intelligent people here, with facts to back their direction of the future economy.

Very interesting and thanks for your wisdom and knowledge.

[Lsbcal]

Quote:

Originally Posted by chassis I saw an article in the past 4-6 weeks that suggested growth in 2021 will have a 4 handle. That is strong. If you take today's level of economic output, and calculate what output should be on a per capita basis in say, Q4 2021 or Q2 2022, the government needs to do nearly nothing to achieve 4% growth, plus or minus. Population and consumer spending do what they do, they grow. From where we are today until things "normalize" growth will be above trend. No magic from the government is needed, it's a gimme.

Your post reminded me of a 25 minute interview I watched on WeathTrack here:
https://wealthtrack.com/why-the-4-fo...d-sustainable/

Quote:

Nancy Lazar told clients recently: “In the last expansion it took almost 9 years (until 2018) for unemployment to fall to 4.0%. Today the Fed expects (more likely wishes) to see 4.0% just 4 years into this expansion. And since this cycle’s Drivers are leveraged to the Fed’s main policy tool – interest rates – the Fed’s in a good position to make it happen.”

[pb4uski]

I'm skeptical. Pre-covid growth was moderate 2.9% in 2018 and 2.3% in 2019.

I seem to recall that in 2019 that consumer spending was 70% of the economy. While middle and upper income seem to be weathering the covid storm pretty well, it has really hurt lower income and decimated small businesses. I heard on the radio today that it is estimated that 90% of entertainment venues (comedy clubs, plays, concerts, etc) wiil fold in the next year or so. I'm very concerned about the lingering effects of unemployment on consumer spending and the economy.

I think the recovery will be slow.... and I'm hoping not Japan-like slow.

[cbo111]

Quote:

Originally Posted by pb4uski I'm skeptical. Pre-covid growth was moderate 2.9% in 2018 and 2.3% in 2019. I seem to recall that in 2019 that consumer spending was 70% of the economy. While middle and upper income seem to be weathering the covid storm pretty well, it has really hurt lower income and decimated small businesses. I heard on the radio today that it is estimated that 90% of entertainment venues (comedy clubs, plays, concerts, etc) wiil fold in the next year or so. I'm very concerned about the lingering effects of unemployment on consumer spending and the economy. I think the recovery will be slow.... and I'm hoping not Japan-like slow.

+1 on being skeptical as well. The biggest variable IMHO is getting an effective covid vaccine sometime early first qtr 21; one that is accessible to a large segment of society, and a large chunk of that society agrees to take the vaccine. Without consumer demand, growth will be stunted. In 2021 I will be thankful for inflation+2% growth in my portfolio.

[OldShooter]

I recently became aware of a marvelous Jewish aphorism: "Man plans, God laughs."

The aphorism is probably old news to many, but it suits my view on predictions. As does my new sig line.

[donheff]

Quote:

Originally Posted by OldShooter I recently became aware of a marvelous Jewish aphorism: "Man plans, God laughs." The aphorism is probably old news to many, but it suits my view on predictions. As does my new sig line.

+1. I don't have a clue but I enjoy hearing all of the informed speculation. Sticking with my AA and things will work out or not.

[Markola]

I try to have a 20 year+ horizon and just trust that my investments will cycle through and things will work out for my globally-diversified, passive index 50/50 portfolio. I also try to remember that I could have predicted, honestly, zero of the factors that moved the markets over the last 20 years.

[Montecfo]

Near term I think future positive Covid news is not fully reflected in stock prices. So there is some opportunity there near term.

I expect recovery to be steady.

[Midpack]

Quote:

Originally Posted by donheff +1. I don't have a clue but I enjoy hearing all of the informed speculation. Sticking with my AA and things will work out or not.

+2. Staying the course here too. I'm just glad we seem to be well overfunded so we don't need to lose sleep over risk/volatility, but that could always change.

[Koolau]

Quote:

Originally Posted by Midpack +2. Staying the course here too. I'm just glad we seem to be well overfunded so we don't need to lose sleep over risk/volatility, but that could always change.

+3 I don't know enough to try anything different than staying with my plan. Oh, I'll probably fret a bit more, but not really change anything. YMMV

[steelyman]

For the time being I’m mostly paying attention to wearing masks, distancing & hand washing/sanitizing.

The portfolio amount (beyond basic comforts/needs) pales in importance compared to health.

[Koolau]

Quote:

Originally Posted by steelyman For the time being I’m mostly paying attention to wearing masks, distancing & hand washing/sanitizing. The portfolio amount (beyond basic comforts/needs) pales in importance compared to health.

Voila'! Reason 387 to ER - no need to go to w*rk to increase the port. and thus expose self to Covid 19. YMMV