“We are telling clients to pay attention to the powerful economic reopening in the U.S., fueled by gargantuan fiscal and monetary stimulus flooding the economy and markets with liquidity,” said Marc Wishkoff, senior managing director and head of business development for Chevy Chase Trust. “We are witnessing pent-up consumer and corporate demand being unleashed.”
But it’s a unique situation. While things are indeed bouncing back, there’s now worry about inflation or a market correction. Interest rates are still at rock bottom, meaning there’s little return right now in the bond markets or cash equivalents. And no one is really sure what’s going on with commercial real estate, what with such a big demand for hybrid work. Wishkoff doesn’t expect a major equity correction this year, though he does advise some caution.
“We are telling clients to pay attention to inflation data but to differentiate between short- and long-term trends,” he said.
Even during the 2020 recession, Wishkoff said, aggregate household net worth expanded by $6 trillion and personal savings by $2 trillion, while debt levels just ticked up modestly. Those numbers will be key going forward.
“We expect the increase in consumer wealth during this recession to be the largest contributor to higher near-term inflation,” he said. “Long-term, we expect inflation to recede after its initial rise, as pent-up demand is satisfied, although we don’t expect it to decline to pre-pandemic levels.”