Insights for action, for global investors

“Do We Need More Stimulus?,” asks Donald Luskin of TrendMacrolytics in an investment research note today. Mr. Luskin writes:

"In client calls this week, we’re hearing a strong consensus that the economy is in a sustainable V-shaped recovery, and that 2021 will be a very good year. We’re not going to say this consensus is wrong. Indeed, it’s what we were nearly alone in predicting all the way back in March and April... Will there be short-term setbacks? Of course, and the formation of a consensus is what usually provokes one... If anything, our biggest difference from the optimistic consensus is that we’re now thinking past recovery to expansion, and we don’t see it as a stretch that 2021 could be a downright boom."

A downright boom? Mr. Luskin continues making his case:

"US households have accumulated $2.5 trillion in personal savings this year, unable or too cautious to spend the prior stimulus money. That’s a moneybomb of pent-up demand equal to 11.8% of GDP, and it will detonate next year when the “third wave” of Covid-19 tops out and 50 million inoculations with the new vaccine are administered through January."