• The economic recovery that has been driving market returns will fade at some point and take a new course – but we are at odds with what the market is expecting.
  • The demand impulse is slowing, inflation is likely peaking, and Fed policy is reflecting the potential for rate hikes in 2023. China’s credit cycle is cooling and central banks around the world are starting to slow their asset purchases.
  • While we’ve been programmed to fade the growth trade when these inputs peak, things might be different this time around. Previous episodes of peak growth momentum have occurred with significant slack still left in the economy, and actual GDP running below projected potential GDP.
  • But according to estimates, the US economy is expected to be running above potential by year end something we haven’t seen in almost 15 years. Maybe this time we plateau back to a level that remains elevated above the long-term trends we are accustomed to.
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The views and opinions expressed are as of July 2021 and may change based on market and other conditions.

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Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.