August 7, 2020
The government’s response to the corona virus stopped the economy dead in its tracks. It started to fall precipitously in March and then collapsed in April. However, it began to turn upwards in May and the rebound gathered momentum in June. As a result, GDP declined 32.7% in the second quarter. The unemployment rate reached a peak of 14.7% in April but has since declined to 10.2%.
However, most states are gradually re-opening. At the same time, $2.5 trillion of fiscal stimulus checks is being disbursed with more stimulus likely in the next month or two. A vaccine should be readily available by the end of this year or early next year. The Fed will keep interest rates at 0% for several more years. As a result, we expect the economy to rebound by 28.0% in the third quarter and a further 7.0% in Q4. Look for 5.5% GDP growth in 2021.