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Raising Economic and Market Forecasts…Again

Raising Economic and Market Forecasts…Again

April 07, 2021
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Today we update forecasts based on how the economy’s recovery from the pandemic, aided by vaccine distribution, massive stimulus, and the desire to return to normal, continues to surpass expectations.

Strong March jobs report. The US labor market grew the most in seven months in March, as the economy added 916,000 jobs, trouncing the median economists’ estimate for a 660,000 gain (source: Bloomberg). Segments of the labor market most dependent on in-person interaction saw the greatest gains, notably hospitality and leisure. We expect to see bigger job gains in the coming months, potentially over one million per month into the summer, helping to close the gap on the more than eight million jobs still needed to get back to the pre-pandemic peak.

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Raising U.S. and global economic growth forecasts. An accelerating vaccine rollout, American’s desire to resume somewhat normal lives, and massive stimulus set the stage for booming growth in the U.S. economy this year. Our 2021 U.S. GDP growth forecast goes from 5—5.5% to 6.25—6.75%. A stronger U.S. growth outlook pushes LPL Research’s expectations for growth in emerging markets and globally higher as well.

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Raising our 2021 S&P 500 earnings estimate. With more economic growth comes more revenue opportunities for corporate America. Companies have been doing a tremendous job of adapting the pandemic, innovating, and generating efficiencies. We are leaving our year-end fair value target for the S&P 500 Index unchanged at 4,050—4,100 for now in anticipation of lower stock valuations as interest rates rise.

Raising our year-end target range for the 10-Year U.S. Treasury yield. Stronger economic growth and more stimulus spending may put further upward pressure on yields. We have raised our forecast for the US 10-year Treasury yield from 1.25—1.75% to 1.75—2.00%.

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IMPORTANT DISCLOSURES

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. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. All index and market data from FactSet and MarketWatch. This Research material was prepared by LPL Financial, LLC. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

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