Pent-up savings and dispersal of stimulus should drive GDP growth this year and next. We anticipate lower medium-term growth as the stimulus ends, taxes rise to fund a multi-trillion-dollar infrastructure package, and higher debt loads create a drag.
The key takeaways are as follows:
We keep our 2021 forecasts for GDP growth at 6.5%, inflation at 2.5%, and 10-year sovereign yields at 1.8%.
Rising corporate and public debt loads suggest a future growth drag, but we see associated systemic risk as low.
While downside risks of federal taxes hikes have risen, risks remain balanced.