It has been a busy two months since we moved to Nevada. Moving our home and my business has taken a huge effort. Going from a 2800 square foot home to a 1250 square foot condo was definitely a challenge. However, we got rid of a lot of stuff that we didn't need. We are getting situated in our new home and enjoying meeting new people, but it has been hard missing our boys, our friends, and our beloved home of 25+ years. That said, hiking, biking, going to the beaches and enjoying all that Lake Tahoe has to offer is a dream come true.
In the first half of 2021, the U.S. economy powered forward faster than nearly anyone had expected. Speed can be exhilarating, but it can also be dangerous. In our view, the overall economic picture remains sound and will likely support strong profit growth and additional stock market gains. But the pace of reopening also creates new hazards: supply chains are stressed, some labor shortages have emerged, inflation is heating up—at least temporarily—and asset prices look expensive compared to historical figures.
The U.S. economy has surprised nearly everyone to the upside as it speeds along—thanks to vaccinations, reopenings, and record stimulus. The growth rate of the U.S. economy may have peaked in the second quarter of 2021, but there is still plenty of momentum left to extend above-average growth into 2022. Despite the natural challenges of ramping back up, the recovery still seems capable of providing upside surprises, and in the end, we could have our best year of real GDP growth since the early 1980s.
Although higher taxes and more regulation are likely coming, an extraordinary amount of support from the Federal Reserve (Fed) and more than $5 trillion in fiscal stimulus so far (with more coming) should continue to support the stock market and economy for the rest of 2021.
Speaking of the stock market, we expect the robust economic recovery to continue to drive strong earnings growth and support further gains for stocks. Don't forget though, after a more than 90% gain off the March 23, 2020, lows for the S&P 500 Index, some choppy action during the historically challenging year two of a bull market would be perfectly normal.
Turning to bonds, it has been a historically tough year, as yields surged earlier this year. Should the economy continue to improve, the door would be open for stocks to continue to do quite well, but we will always appreciate bonds' important role in a portfolio as a source of income and as a potential diversifier during equity declines.
The first half has been a good one for investors. While the road ahead may bring more gains in the second half, it might be a bumpy ride. Please contact me if you have any questions.
Cheers from Lake Tahoe,
Diane
Important Information
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
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All index data from FactSet.
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