Quote on US Economy`s Resilience: Impact of Massive Fiscal Stimulus and Labor Market Dynamics Say`s Dr. V K Vijayakumar, Geojit Financial Services
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below the quote on Impact of Massive Fiscal Stimulus and Labor Market Dynamics from Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The resilience of the US economy and tightness of the labour market have come as a surprise. The main reason for this strength of the economy is the $5 trillion of fiscal stimulus provided by the US Govt during Covid lockdown. The fiscal stimulus didn’t result in spending since there were no avenues for spending during the lockdown.
It is possible that monetary tightening might slow down after a lag. Inflation is down to around 3% and slowdown can cause further decline in inflation, allowing the Fed to cut rates by 2nd quarter of 2024.
The present high yield on US bonds is a headwind for equity markets. But high yields are unlikely to last long.
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