Now that there is a new administration in the White House, analysts are beginning to get a sense of what is to come for the US economy. President Biden unveiled a $1.9 trillion stimulus package that includes more direct payments to Americans, increasing unemployment benefits, and help with coronavirus vaccine rollouts across the country. Republicans aren’t too keen on such a large stimulus package and came back with a counteroffer of their own. The Republican-led stimulus package totals $618 billion, cutting certain areas like less money for direct payments to Americans and reduced funds for schools, states, and localities.
One area of contention appears to be eligibility for individual stimulus checks. Biden hopes to keep the income requirements at $75,000 per individual and $150,000 per married couple, while Republicans want these thresholds reduced, proposing $50,000 per individual and $100,000 for married couples.
COVID vaccinations are key to economic recovery
The domestic economic recovery will only go as quickly as the country receives mass vaccinations. President Joe Biden claimed that the former administration had no discernable plan to administer vaccines to the public quickly and efficiently, and he now has to form such a plan with his team of experts. Biden’s goal is to vaccinate 100 million people within his first 100 days in office, a goal which some claim does not do nearly enough to speed the process along, while others believe won’t be doable because of the lack of infrastructure to carry out such a plan.
Meanwhile, other countries have shown an ability to quickly vaccinate their population, leading to quicker expected recoveries. Countries like Israel and the UAE have been vaccinating residents at an extremely high rate, which has directly led to a decrease in coronavirus cases, hospitalizations, and deaths.
Fourth quarter GDP rose, barely
Figures for the fourth quarter of 2020 came in and while they were positive, it’s clear the country is not yet back at pre-pandemic levels of output. GDP grew by 1% quarter-over-quarter in the last quarter of the year, down from the 7.5% growth seen a quarter earlier. It appears that as the global pandemic re-emerged, consumer spending slowed, as many businesses had to once again limit capacity or close altogether. Additionally, stimulus funds dried up toward the end of the year, and without an additional stimulus package passed, businesses and consumers were left to fend for themselves.
One piece of good news is that the economy is recovering more quickly than the most recent 2007 recession. Four quarters into this recession and GDP seems to be on the road to recovery, something that took close to 8 quarters in the past recession. At this rate, it’s expected that the economy could recover to pre-pandemic levels by this time next year.
Gulf countries set to explode
As oil prices plunged in 2020, Gulf Arab countries spent the year attempting to diversify their economies into the 21st-century. As a result, these nations could see major growth in the coming year. In a bold move, the United Arab Emirates announced it would allow foreigners to obtain a UAE passport. This could attract major talent to the country, which is attempting to grow its high-tech sector. Additionally, peace deals between Israel and the UAE and Bahrain have set the table for the trading of high-tech resources between the nations. Israel is one of the most technologically advanced countries in the region, and the world, and recent peace accords are all but likely to help translate into a migration of technology into the Gulf.
Gulf countries are doing everything they can to attract new businesses and foster innovation. According to the World Bank, Gulf countries Qatar, Bahrain, Kuwait, and Oman rank very high as countries where it is easy to do business.’
For the Month Ending 1/31/2021 (Cumulative Returns)1
1Source – Morningstar, Inc. Corporate Bonds is presented as the iShares iBoxx $ Investment Grade Corporate Bond ETF. Municipal Bonds is presented as the iShares National Municipal Bond ETF. High Yield Bonds is presented as the iShares iBoxx $ High Yield Corporate Bond ETF. 10 Year Treasury refers to the valuation of a 10 Year Treasury Note, a debt obligation issued by the U.S. Department of the Treasury. Fed Funds Target represents upper limit of the federal funds target range established by the Federal Open Market Committee. Inflation Rate provided for the purposes of this report by the U.S. Bureau of Labor Statistics. Unemployment Rate calculated by the U.S. Bureau of Labor Statistics. WTI Crude Oil refers to the price of a barrel of West Texas Intermediate NYMEX) Crude Oil. Gold – Spot Price relates to the valuation of an ounce of gold, as traded on the NYSE Arca Exchange. U.S. Dollar refers to the U.S. Dollar Index (DXY). All Returns are denominated in USD (United States Dollar), unless otherwise explicitly noted.
Did You Know?
Even Warren Buffet gets rejected
The world’s most famous investor, Warren Buffet, had his fair share of failures. In fact, after completing his undergraduate degree at the University of Nebraska in three years, Buffet applied to the prestigious Harvard Business School. After he interviewed for a place at the institution, Harvard staffers told him that he would not be accepted into the institution. It was Harvard’s loss, as Buffet set his sights on Columbia where he was able to learn from investing giants like Benjamin Graham and David Dodd. In fact, Buffett claims that getting rejected by Harvard was the best thing to happen to him.
Presented by the Investment Committee of Lake Street, an SEC Registered Investment Adviser
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