Consumer spending is the life blood of the U.S. economy and policymakers devoted much of 2020 to bolstering future demand. A lot of the money injected into the economy was spent, which saved jobs, but a lot was actually saved. The personal savings rate currently stands at a post-WWII high of 14%, more than double the 75-year average. Folks, this is a lot of future buying power. The savings rate (historically) is highly predictive of future of GDP growth. Consumer balance sheets are also healthier than they have been in generations. The economic stars are aligned for the US economy to grow faster than we have seen in generations. The Atlanta Federal Reserve is now projecting a 9.5% real GDP growth rate for the first quarter. While the average economist is projecting 5%-6% real economic growth for all of 2021, we believe this may be conservative, as does Goldman Sachs. Their economists expect annual GDP growth will be over 9%! We think these are legitimate expectations because the data backs it up and more government stimulus will be arriving by spring. It really makes you wonder if the extra $1.9 trillion of additional stimulus is even needed at this point. Will it accelerate healthy economic growth or will it prove too much and overheat the economy? Only time will tell. For those that are wondering why the stock market has risen so much over the past year, the answer is because the economy and corporate profits are about to soar.
