Growth should continue in 2021, strategist says
The economy should continue to improve in 2021 and the stock market will reflect that, a local financial adviser said Thursday.
John Chapman, CEO and chief investment strategist of Clearwater Capital Partners in Hoffman Estates, said in a Harper College Educational Foundation webinar that the trends are moving in the right direction for continued growth.
The gross domestic product rose significantly in the third quarter after collapsing in the second quarter, but Chapman said GDP is expected to level off in the fourth quarter. It will continue to rise, but more modestly.
The economy still hasn't gotten back to where it was before the jolt that came when the COVID-19 pandemic hit in March. It is about 3% smaller than a year ago, he said, and 5% to 10% smaller than it would have been if not for the pandemic.
"Getting the economy back to a healthy rhythm will take time," Chapman said.
But there are "bullish trends in place," he said, noting the stock market has seen a "tremendous rally" since Election Day. That's because investors don't expect big tax hikes or a rollback of tax cuts, nor do they expect big regulatory changes if the Republicans hold the Senate, as seems likely pending the runoff for the two Georgia seats in early January. Investors also expect an easing of trade wars and less deficit spending.
Chapman did project a moderate stimulus of about $1 trillion.
Investors seem to be betting already on green energy stocks, Chapman said. The thinking is those stocks will benefit from President-elect Joe Biden's policies to combat the climate crisis.
The University of Michigan's survey of consumer sentiment reached 81.8 in October, the highest mark since March.
Retail sales not only have rebounded from the spring crash, they are outperforming from September 2019. Year-over-year retail sales were up 5.4%, he said.
Unemployment dropped steadily since a big jump in April, but it hasn't returned to pre-pandemic levels and it might not get there anytime soon.
"Companies have learned they can do more with less," Chapman said.