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Outlook for U.S. Economy and Financial Markets

Keel Point

August 30, 2021

The US and global economies continue to perform well

  • The recent slowing in the US is positive, and it reduces inflation pressures which gives the Fed more latitude in supporting employment growth.
  • Slower growth in 2021 resulting from lower consumer confidence and spending will mostly get pushed into 2022.


S&P Earnings growth is the big, positive news, with second quarter S&P 500 earnings per share growing 95+% year over year after 50% growth in Q1 and positive outlook Q3.

  • The S&P 500 P/E multiple has declined as earnings growth has exceeded price growth.
  • Many investment shops are revising 2021 S&P targets upward.


The S&P has average intra-year corrections of 14.5%.  It doesn’t mean the markets are over-valued.


The Fed is committed to seeing full employment return and will be very patient with inflation, as we said in our Inflation Webinar on July 22.

  • Inflation will be higher and stickier than the Fed hopes, but transitory price spikes are receding.
  • Bond Buying tapering is likely to begin later this year and be gradual as indicted by the Fed’s July meeting minutes.


The biggest risk is Covid’s impact on consumer confidence and spending.

  • Major shut-downs are un-likely, but concerned folks will take themselves out of the market and labor pool which could lead to “stag-flation.”
  • Geo-political risks are pretty low right now. Big spending and tax increase proposals are facing greater headwinds in Washington.

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