Spark Trader Limited reports:
Was the second quarter a peak for economic growth and earnings? Are STOCKS in danger? On the contrary, the number of short positions is the lowest since 2019, according to the data.
As the chart below shows, jpmorgan expects growth to slow rapidly to 2% by 2022.
Goldman Sachs also lowered its consumption growth forecast for the second half of 2021, leading to a 1 percent cut in its GDP growth forecast for the third and fourth quarters, respectively, as it became clear that the US services sector recovery was unlikely to be as strong as the bank had expected. Given the trillions of dollars the Fed has pumped into stimulus, it is hard to understand why the recovery is still slow.
While Goldman expects the slowdown to be manageable in 2021, it will get worse in 2022, when the slowdown is expected to really hit growth, with Goldman forecasting growth to contract to between 1.5% and 2% by the second half of 2022, a “much more severe deceleration” than the consensus forecast.
The direct driver of US economic growth from Q3 2020 to Q2 2021 was substantial monetary stimulus, from extended unemployment benefits to direct checks to households, which significantly stimulated consumption. However, this has not translated into stronger economic growth or employment.
“Sustainable, demander-driven inflation requires sustainable wages to support higher prices. Due to artificial incentives, personal consumption expenditures were 7 percent higher than the pre-pandemic norm, while employment was reduced by about 6 million jobs.”
With qe tapering, growth is clearly shrinking. The only question is whether current forecasts are still too optimistic.
The next challenge is that federal spending will fall sharply. The spending would be spread over 10 years, though it could be supplemented by a trillion-dollar infrastructure plan. What’s more, federal spending hurts economic growth, and the marginal effect of easing is getting weaker.
A multiplier effect greater than 1 means that government spending attracts the private sector and generates more private consumption spending, private investment and exports. If the multiplier is lower than 1, government spending crowds out the private sector, reducing the overall efficiency of economic activity.
For now, the multiplier effect of Fed spending is negative. Politicians spend money based on political ideology, not sound economic strategy.
Since 1977, the 10-year average GDP growth rate has fallen steadily as debt has increased. Therefore, from the historical trend of GDP growth, an increase in debt will lead to a future slowdown in economic growth.
The current problem for investors. Analysts’ assumptions are always high and valuations are more extreme, leaving little room for disappointment. Using analysts’ target price assumptions of 4700 for the S&P 500 in 2020 and current earnings estimates, s&p earnings growth is 2.6 times.
But the US has gone headlong, most notably with a sharp decline in short positions, which are at their lowest as a percentage of the S&P 500’s market capitalisation in nearly three years, according to Goldman Sachs. The bears had a brief rally in March last year, but since then have entered a downtrend.
Investors continued to chase gains in U.S. stocks, putting $6 billion into the largest exchange-traded fund that tracks the S&P 500 index on Monday. That’s the biggest money investors have put into the SPDR S&P 500 ETF Trust (ticker SPY) since the U.S. presidential election.
Todd Rosenbluth, director of ETFs and mutual funds at CFRA Research, said:
“SPY tends to be used more by institutional investors and is of interest in times of uncertainty due to its strong liquidity, with markets showing signs of volatility yesterday as a result of the turmoil in Afghanistan.”
While the S&P 500 is hitting new highs and August is on track to be one of its quietest months ever, there is still a degree of anxiety. In addition to geopolitical concerns such as the Taliban seizing control of Kabul, mixed economic data have added to concerns about the Delta strain and its impact on the global economic recovery.
Monday’s inflows to SPY were the largest single-day since November 9, 2020, and the seventh straight day of inflows totaling $9.9 billion.
Reprint indicated source：Shine Trader Limited Live information