The last year has been a wild ride, from an economic perspective. The COVID pandemic and the resulting business and financial uncertainties have delivered both pitfalls and opportunities for investors and stakeholders alike. As we move into 2021, there seems to be a light at the end of the tunnel. The vaccine rollout is well ahead of schedule in the United States, businesses on all levels are reopening, and our President has suggested that if all goes well we may be back to normal in time for the Fourth of July. However, in the midst of all that, it may be wise to take a moment and listen to the people who directly manage the US economy–the Federal Reserve.
In a rare televised appearance, Federal Reserve Chair Jerome Powell delivered a series of predictions, warnings, and projections for the US economy in the months ahead. It’s a mix of good news, rather less good news, warnings, and opportunities. Let’s break it down point by point:
- Good news: due to a series of Federal economic stimulus packages and the accelerated vaccine rollout, the US economy has reached an inflection point and should start to grow much more quickly as a result.
- Despite Powell’s confidence in the coming economic growth, a great deal depends on a successful resolution to the pandemic. With that in mind, he encourages Americans to continue masking and following social distancing guidelines and to get the vaccine as soon as possible in order to ensure that the recovery isn’t derailed by a second wave of COVID-19. In addition, Powell cautioned against businesses reopening too soon and beginning another wave of infections.
- While Powell acknowledged that some asset prices are elevated, he also stated that the Fed will continue its current levels of economic support for the time being. The Fed is currently in unprecedented territory when it comes to economic support, and will remain there until the economy reaches full employment.
- Powell also remarked that it was unlikely the Fed would raise interest rates this year, due to the economic projections currently in play. In further good news, he also noted that it was unlikely the economy would face a retraction or collapse similar to the Great Recession of 2007/2008.
- Now for some less good news: there are potential points of concern on the horizon. Powell said that the Fed is most concerned about the potential for a cyberattack to disrupt the US economy by hindering the ability of financial institutions to track payments. Such attacks may cost up to $100 billion annually. Given the recent history of cyberattacks in both the US and Europe, this is a cause for concern for investors on all levels.
The take-home from all of this is that while some risks remain and there are challenges ahead, the outlook is good for all levels of economic growth. Powell predicted that the US economy will emerge from covid “better and more inclusive” than it was before.
So what are investors to do? It’s difficult to give specific advice; the moves you make in the coming months will depend on your situation, goals, and resources. These are the times in which expert guidance is a must, helping you illuminate the blind spots in your financial and investment plans. Get in touch with your financial advisor today and discuss your options for the rest of 2021.