U.S. Economy Isn’t Out Of Danger Zone Yet; Expect Problems In 2021

You also have to keep in mind that, since the pandemic started, consumer sentiment has been really hurting in the U.S. economy. Americans haven’t been going out and shopping as much as they would normally. Either they’ve been concerned about their health or, simply, wherever they’ve wanted to spend their money has been closed due to restrictions. Or they’ve just been nervous about what’s ahead for them financially. Will they still have a job?

Don’t forget, consumer spending is hands down one of the biggest forces that effect the U.S. economy.

What Happens if Growth Isn’t as Expected?

Thanks to the U.S. government spending rigorously, and the Federal Reserve keeping interest rates low, the economic problems have just been kicked down the road, not eliminated.

In the coming quarters, I suspect that the U.S. economy will slow down a bit. Currently, the Federal Reserve expects gross domestic product (GDP) to grow by 4.2% in 2021. (Source: “December 16, 2020: FOMC Projections Materials, Accessible Version,” Federal Reserve, December 16, 2020.)

This may be a slightly optimistic projection.

What happens if the economic growth is lower than expected? Investors have bought into the idea that the U.S. economy is fine and that everything is great. If it’s not as rosy as expected, don’t be shocked to see investors sell their stocks.

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