An Economic Boom Is Coming But Not All Stocks Will Profit

An Economic Boom Is Coming But Not All Stocks Will Profit

Posted On January 22, 2021 12:31 pm

After epic rallies in 2019 and 2020, the market is taking a breather so far in 2021.

Of course, not all stocks are performing equally well or poorly.

  • S&P 500 is barely up for the year
  • Nasdaq is down for the year
  • Enbridge (ENB), a Canadian dividend aristocrat pipeline giant is up like a rocket, 10% in two weeks

Moody’s, one of the 16 most accurate economists in the World according to MarketWatch, has just put out its latest base-case economic forecast.

  • which has important implications for your portfolio
  • because while the greatest economic boom in 35 years is possibly coming
  • not all stocks will benefit equally

Why Moody’s Expects Two Years of BlockBuster Growth

Moody’s points out that the US is now on track to potentially deliver a fiscal stimulus of almost 25% of GDP, the highest in the world.

With this additional boost, real GDP should be robust at just over 5% this year and the same next, bringing the economy back to full employment by early 2023.” – Moody’s (Emphasis added)

Moody’s expects inflation-adjusted GDP growth of more than 10% in the next two years.

  • the best GDP growth in 35 years

Moody’s is now forecasting a $1.2 trillion net infrastructure bill.

  • $1.5 trillion in total spending
  • with $370 billion funded by increased taxes
  • tax hikes expected to start in 2024

A total of $3.1 trillion in total fiscal stimulus is what Moody’s considers the most likely outcome.

  • most likely passed in the first half of 2021
  • via reconciliation

The total amount of stimulus would be close to $7 trillion, $12 trillion if you include the Fed’s QE efforts.

  • 60% of GDP worth of combined stimulus

Moody’s is so far the most optimistic blue-chip economist when it comes to stimulus but Goldman and Morgan Stanley both expect about 6% GDP growth in 2021 as well.

  • Goldman expects $1.1 trillion in round three stimulus ($800 billion less than Moody’s)

Why Some Stocks Will Soar And Others Will Likely Collapse

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About author

Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I'm a proud co-founder of Wide Moat Research, Dividend Kings, and the Intelligent Dividend Investor. My work can be found on Seeking Alpha, Dividend Kings, iREIT, and the Intelligent Dividend Investor. My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives. With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams and achieving long-term financial goals.

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