Chart of the Week – Dark Before the Dawn

We believe the pandemic will continue to wreak havoc on parts of the economy through the first quarter of 2021. However, our above-consensus 2021 growth estimate may encourage risk taking in equity markets.

High-frequency mobility data from the Dallas Federal Reserve Bank clearly shows that consumers are starting to limit activity in the face of a COVID-19 resurgence. This is a headwind to growth, but we believe that additional fiscal stimulus, an inventory replenishment cycle and high savings rates will buffer the near-term impact to the economy. As a greater percentage of the U.S. population becomes vaccinated through late spring, pent-up demand for forgone activities in the service economy should have a meaningful positive impact on 2021 growth. We are estimating U.S. real gross domestic product growth of 5% in 2021, versus the consensus estimate of 3.8%.

Dallas Federal Reserve Mobility & Engagement Indicator (7-day Moving Average)

Source: Dallas Federal Reserve Bank, Bloomberg, Ivy Investments. The Dallas Fed Mobility & Engagement indicator tracks geolocation data collected from mobile devices relative to their weekday average over January/February 2020. Dates shown are January 3, 2020 through November 28, 2020. This chart is being provided as a general source of information for education purposes only, and is not intended as a recommendation to purchase, sell or hold any specific security or to engage in any investment strategy.