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).
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