6 Key Economic Projections For 2021

This time last year, no economist in the world was projecting an economic shutdown, a global pandemic and the complete disruption of global commerce. But with vaccines already being distributed worldwide, investors are hoping 2021 will be a much less bumpy ride.

If the recovery stays on track, conditions in 2021 could be very favorable for stock prices. Bank of America recently compiled a list of six economic projections for investors to watch for in 2021.

1. 4.5% U.S. GDP growth. The U.S. economy contracted by 3.5% in 2020 thanks to the pandemic. However, it was already bouncing back in the second half of 2020, and economists expect that recovery to continue throughout 2021.
2. 5.4% global economic growth. The global economy shrank by 3.7% in 2020. But economists are expecting an even stronger economic recovery outside the U.S. in 2021.
3. 1.9% U.S. inflation. The unprecedented federal government stimulus measures in 2020 have many investors concerned about a spike in inflation levels. However, economists are anticipating just 1.9% inflation in 2021, still slightly below the Federal Reserve’s target rate of 2%.
4. 4% rise in U.S. home prices. The housing market boomed in 2020 thanks to plummeting mortgage rates. Bank of America is expecting housing prices to increase another 4% in 2021 after gaining an estimated 5.9% in 2020.
5. 5.1% U.S. unemployment rate. U.S. unemployment peaked at 14.7% in April 2020 but had fallen to just 6.7% as of November. Economists are expecting it to continue to fall in 2021 as the economy recovers.
6. 3,800 price target for the S&P 500. The S&P 500 has a surprisingly good year in 2020 despite all the pandemic turmoil. After a huge rally off the March 2020 lows, Bank of America is projecting only about 0.8% additional upside for the SPDR S&P 500 ETF Trust (NYSE: SPY) in 2021.

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