Signals indicate that the fourth quarter of 2021 and 2022 will see strong economic growth despite headwinds posed by the Delta variant of Covid-19 and some volatility in consumer confidence, according to Jeff Schulze, investment strategist at ClearBridge Investments.
The economy is based on “a golden loop scenario for equity investors,” Schulze said in an interview today.
ClearBridge Investments, a New York-based global investment manager with $ 198 billion in assets under management, produces an economic analysis called the ClearBridge Recession Risk Dashboard that examines consumer health, business activity and financial stress. Right now, all indicators are in a favorable range and ready for expansion, Schulze said.
“There may be a slight slowdown in retail sales and a small dip in consumer confidence, but it’s no more grim than that,” he said. “Any slowdown is already built into the market. “
Advisors should tell their clients to expand their exposure to the market, especially if they are sitting on cash, Schulze added. Overall, GDP growth is expected to be 6% for the fourth quarter of this year and next year.
“We are witnessing the strongest year of GDP growth since 1984,” he added. “This economy creates a very strong backdrop for business. It is a period of strong growth that should continue for five or six quarters. The second year after a bear market, like the one that occurred in early 2020, is generally strong economically. “
In particular, the energy, industrial and financial sectors are expected to perform well over the coming months, he said.
Although August showed disappointing employment reports, this was mainly due to the impact of Hurricane Ida on the Gulf Coast, he added.
In a recent blog post, “Anatomy of a Recession,” Schulze said that the rapidly changing landscape of job creation means that the Federal Reserve’s “substantial progress” barometer for the labor market does has not yet been achieved. This development could delay the tightening of monetary policies by the Federal Reserve.
“Even when the Fed finally begins to renormalize monetary policy away from extraordinary crisis measures, its overall stance will still remain fairly accommodative, continuing to support the current bull market,” he said.
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