Market Week: May 10, 2021

GDP Jumps 6.4% in the First Quarter

On April 29th, the Bureau of Economic Analysis reported that real gross domestic product increased at an annual rate of 6.4% in the first quarter of 2021. For perspective, in the fourth quarter of 2020, real GDP increased 4.3%.

“The increase in real GDP in the first quarter reflected increases in personal consumption expenditures (PCE), nonresidential fixed investment, federal government spending, residential fixed investment, and state and local government spending that were partly offset by decreases in private inventory investment and exports. Imports, which are a subtraction in the calculation of GDP, increased.”

But economists were quick to pounce on this disclaimer:

“The increase in first quarter GDP reflected the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic. In the first quarter, government assistance payments, such as direct economic impact payments, expanded unemployment benefits, and Paycheck Protection Program loans, were distributed to households and businesses through the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act.”

Further, the Bureau of Economic Analysis reported that:

Current-dollar GDP increased 10.7 percent, or $554.2 billion, in the first quarter to a level of $22.05 trillion.

The price index for gross domestic purchases increased 3.8 percent in the first quarter, compared with 1.7 percent in the fourth quarter.

The PCE price index increased 3.5 percent, compared with an increase of 1.5 percent.

Excluding food and energy prices, the PCE price index increased 2.3 percent, compared with an increase of 1.3 percent.

Personal Income Leaps in the First Quarter Too

Current-dollar personal income increased $2.40 trillion in the first quarter, or 59.0 percent, compared with a decrease of $351.4 billion, or 6.9 percent, in the fourth quarter.

The increase primarily reflected government social benefits related to pandemic relief programs, notably direct economic impact payments to households established by the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act.

Disposable personal income increased $2.36 trillion, or 67.0 percent, in the first quarter, compared with a decrease of $402.1 billion, or 8.8 percent, in the fourth quarter.

Real disposable personal income increased 61.3 percent, compared with a decrease of 10.1 percent.

Personal saving was $4.12 trillion in the first quarter, compared with $2.25 trillion in the fourth.

The personal saving rate – personal saving as a percentage of disposable personal income – was 21.0 percent in the first quarter, compared with 13.0 percent in the fourth quarter.

More Data Later This Week

More economic data will be released later this week, including Productivity and Costs data on Thursday and Consumer Credit data on Friday.

Click here to download a PDF of this report.

Categories

Securities offered through LPL Financial, Member FINRA/SIPC. E2E Financial is another business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance LLC, a registered investment advisor. Independent Advisor Alliance is a separate entity from LPL Financial.

The information contained in this e-mail message is being transmitted to and is intended for the use of only the individual(s) to whom it is addressed. If the reader of this message is not the intended recipient, you are hereby advised that any dissemination, distribution or copying of this message is strictly prohibited. If you have received this message in error, please immediately delete.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. Investing involves risk including the possible loss of principal.

The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. Indexes are unmanaged and cannot be invested in directly.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The Bloomberg U.S. Aggregate Index represents the U.S. investment-grade fixed-rate bond market. This index is unmanaged, and its results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Market Index captures broad US equity coverage. The index includes 3,204 constituents across large, mid, small and micro capitalizations, about 99% of the US equity universe. Indexes are unmanaged and cannot be invested in directly.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.