Will the economy catch up in 2021?

Will the economy catch up in 2021?
There will be turmoil in the first few months of the next year before the economy begins to stabilize. The economic recovery will depend upon effective distribution of covid-19 vaccine and fiscal stimulus. The economic recovery is expected in the second half of the year 2021.

The recession caused by pandemic is peculiar in its nature because the gains and losses are on the two extremes. Tech service and real estate industry are clear gainers here, whereas the unemployment rate among low income workers is too high. This shows that the effect of this recession is not uniform. The unemployment problem will take a few months before things will improve somewhat.

Stock market is another indicator of economy, but it can act as a compass and not as a map. Observing the trend, we see that the stock market is doing great but that doesn’t assure a smooth sailing for the economy in future. Even though economy may catch up in the times to come, but a steadily rising stock market cannot be used as an indicator for that, as there is a chance of it getting volatile in future. Normally it takes three years for the stock earnings to bounce back from a fall.

Inflation is expected to rise in the coming months of 2021, but its rise will not be alarming. Factors which can suppress inflation are there, for example, reducing the wages of employees who move to less costly areas. It’s expected that inflation will show its effect on costs of assets like real estate and won’t exceed 2%.

Due to low interest rates financing the debts won’t be hard, but the market may not be as supportive always. The GDP may get dominated by debt services in future, giving rise to a probable financial crisis. Currently the investors don’t hesitate in putting their money in U.S. Housing market has been going strong despite the recession caused by covid-19 pandemic. Inventory has been a challenge along with getting permits, homebuilding and getting prospective sellers. Once the covid-19 vaccine is in circulation, people will not hesitate in allowing strangers to visit their homes. We can expect that the mortgage forbearance options may extend as far ahead into the year 2022 even after change in administration – this will enable job market recovery. If the Biden administration decides against extending mortgage forbearance options, a substantial rise in foreclosures will occur.  Hopefully the housing sector is given its due priority by the new administration.