2021 Economic Update

This year has been a bit of what we expected after coming out of 2020.  The first two months of 2021 continued to have somewhat stagnant economic growth due to continued COVID-19 restrictions.  However, in March and April, we started seeing more light at the end of the tunnel.  At this point, one-third of Americans have been fully vaccinated against COVID-19, and 44% have received at least one dose of a vaccine.  State mandates are becoming less restrictive, i.e., increased capacity in businesses, ease on mask mandates.  After a year of pent-up demand, U.S. consumers are spending more – 70% of our GDP growth is based on consumer spending.  Economists are now forecasting an increase in the U.S. GDP of over 5% for 2021, compared to 4% that was forecast at the beginning of the year.

GDP in 2015 = +2.88% GDP in 2018 = +2.90%
GDP in 2016 = +1.57% GDP in 2019 = +4.10%
GDP in 2017 = +2.22% GDP in 2020 = -2.30%

Since March 2020, policy makers have spent a tremendous amount of time and money on keeping the U.S. Economy afloat.  The following Acts were signed into law during 2020:

  • Coronavirus Preparedness and Response Supplemental Appropriations Act signed on March 6, 2020 – $8.3 billion dollars. It funded testing and vaccine research.
  • Families First Coronavirus Response Act signed on March 18, 2020 – $105 billion dollars. It provided paid sick leave, tax credits, free Covid testing, increased Medicaid funding, just to name a few of the benefits.
  • Coronavirus Aid, Relief and Economic Security Act (CARES Act) signed on March 27, 2020 – $2 trillion dollars. This act mainly delegated authority to federal agencies to use the funding in a targeted manner – support for economy, public health, individuals and businesses.
  • Paycheck Protection Program and Health Care Enhancement Act signed on April 24, 2020 – $484 billion. It provided additional funding to programs initially created under the CARES Act.

In 2021, another COVID relief bill was signed into law, and additional spending proposals are on the table for later in the year.

  • American Rescue Plan Act of 2021 was signed into law on March 11, 2021 – $400 billion to direct COVID response, $1 trillion in relief to families and individuals, $440 billion for communities and businesses.
  • Look for the “infrastructure” package in the $2 trillion range in 2021 to provide more jobs and bring the unemployment rate back down in the U.S.
  • American Families Plan has now been proposed as well – $1.8 trillion. The purpose of this legislation is to provide support for education, direct financial support to families, as well as extended tax credits.

What do the US economic indicators say?

  • Unemployment figures: As of April 2, the US unemployment rate is down to 6%.  This is from a high of over 14% this time last year.  If the infrastructure bill passes, we will expect this figure to continue to decline over the next year.
  • Business spending: Spending on equipment and capital expansion have increased so far in 2021.  Connecting unemployed workers to available jobs could hamper continued growth.
  • Housing and residential construction: This economic indicator continues to expand in smaller areas of the US, particularly our area.  With continued low mortgage rates, individuals and investors are using “cheap” money to buy real estate.  Demand for housing will be strong as workers continue to work remotely.  The cost of supplies could increase the home prices, further reducing affordability in some areas.
  • Monetary policy: In his April 28th address, Federal Reserve Chairman Powell indicated the Fed was unlikely to increase fed funds rates in the near term.  We expect short term interest rates to be low into 2023.
  • Inflation: Inflation should pick up this year due to economic growth.  We are likely to see inflation in the 2% range, which would be an increase over the average for the past several years.
US Stock/Bond Market Performance for Year to Date (4/30/21)1
S&P 500 +12.99%
Dow Jones Industrial Average +12.00%
NASDAQ +9.96%
MSCI EAFE (Large International Stocks) +5.60%
MSCI EAFE EM (Emerging Markets Stocks) +4.17%
Barclays US Aggregate Bond -2.99%

What’s happening internationally?

On the international scene, things have looked a bit different than in the U.S.  Countries around the world have taken different approaches to dealing with the COVID-19 pandemic.  Some have remained open and depended on the “herd immunity” philosophy, while others exhibited more control and implemented stricter guidelines.  Vaccine availability and usage have been mixed.  Currently, both the developed and undeveloped markets are underperforming the U.S. stock markets by more than half.

Headwinds for U. S. Markets and GDP

Just like any other year, we could see a few short term setbacks in the economic growth this year. A COVID variant could impact the continued reopening of global economies as well as ours. Any substantial increase in inflation caused by overspending and supply and labor shortages. Higher national debt costs could result in a short term drawback, but is unlikely this year. A non-U.S. economic downturn (mainly in Europe, India or Asia) could affect us since we are more and more a global economy.

~Jennifer Adams



  1. Investment Strategy Quarterly. Raymond James. Chief Investment Officer Larry Adam. Volume 13, Issue 2, April 2021. (https://www.raymondjames.com/branches/library/features/investment_strategy/investment_strategy.pdf)
  2. bigcharts.com


The information contained in this document does not purport to be a complete description of the securities, markets, or developments referred to in this material.  The information has been obtained by sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  The opinions expressed here are those of Jennifer Adams and not necessarily of Raymond James.  Opinions are as of this date and are subject to change without notice.  There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.  This material is being provided for information purposes only.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  The indexes mentioned are unmanaged and cannot be invested into directly.  Past performance is no guarantee of future results. 

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system. MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 22 developed nations. MSCI Emerging Markets is designed to measure equity market performance in 25 emerging market indices. The index’s three largest industries are materials, energy, and banks. The Barclays Capital Aggregate Bond Index, which used to be called the “Lehman Aggregate Bond Index,” is a broad base index, maintained by Barclays Capital, which took over the index business of the now defunct Lehman Brothers, and is often used to represent investment grade bonds being traded in United States.