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Key Takeaways
This Tuesday is Dr. Seuss’s birthday! The whimsical author’s stories have captivated young readers for decades, and many of his imaginative illustrations have been brought to life on the big screen for audiences of all ages. His success began after he was challenged by William Spaulding, then director of Houghton Mifflin’s education division, to write a story that “first-graders can’t put down” with a minimal number of words chosen from a pre-selected list. Needless to say he accomplished this feat, as the delightful read inspired Beginner Books, a new division of Random House which he himself co-founded. Simplicity was the key to his success, and we think less can be more when it comes to sharing our investment insights too. Our 2021 GDP forecast has been revised higher to 4.5% from 4.0%, but there are a few simple reasons as to why there is significant upside to even this forecast and we’ll borrow a few of the iconic phrases from Dr. Seuss to explain these factors and their potential implications.
Be Sure Where You Step, Step With Care & Great Tact, & Remember The Recovery Will Be A Great Balancing Act | Heightened upside risk for our GDP forecast inherently leads to upside risk to our year-end target for the S&P 500 (2021 year-end target: 4,025), as better than expected economic growth should benefit corporate earnings. However, our optimism is tempered as faster than expected economic growth may be accompanied by rising interest rates (the 10-year Treasury reached the highest level in over a year this week) and inflation in the near term. We detail our view that the most recent equity market volatility provides a buying opportunity in our special Thoughts On the Market publication titled “Inflating Concerns?” (February 25, 2021).
All expressions of opinion reflect the judgment of Raymond James & Associates, Inc., and are subject to change. Information has been obtained from sources considered reliable, but we do not guarantee that the material presented is accurate or that it provides a complete description of the securities, markets or developments mentioned. There is no assurance any of the trends mentioned will continue or that any of the forecasts mentioned will occur. Economic and market conditions are subject to change. Investing involves risk including the possible loss of capital. International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. Companies engaged in business related to a specific sector are subject to fierce competition and their products and services may be subject to rapid obsolescence. Past performance may not be indicative of future results.
Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success.
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