Macroeconomic Outlook: Optimism and Uncertainty Collide

In a Unique Environment, We Remain Tethered to Investment Policy

Tunnel vision paints a picture of optimism. During the second quarter, US GDP continued its steady climb, US equities continued to hit record highs, and job growth continued its ascent from pandemic-induced lows.

Yet, while we welcome burgeoning optimism, Chief Investment Officer Rick Pitcairn is looking more broadly at mixed signals fueling some apprehension. A far more contagious Delta variant is finding susceptible hosts worldwide, accounting for nearly all new US COVID-19 cases, and injecting added volatility into markets.

"Unenthusiastic bull" and "fully invested bear" are two monikers that capture market unease while still conveying a continued preference for stocks. Our August 2021 Macroeconomic Outlook makes sense of competing narratives in a still-strong market environment.

Key Takeaways

  • Economic growth, rising corporate earnings, low interest rates, and transitory inflation pressures support further equity appreciation, yet we believe a near-term correction would support long-term market health.
  • US stocks outperformed non-US in the second quarter. It may take slower US growth or a weaker dollar for international stocks to curb US dominance.
  • We continue to keep a keen eye on upcoming tax legislation, but do not expect draconian measures and recommend patience as negotiations play out.
  • In a unique environment characterized by both optimism and uncertainty, it is prudent to maintain exposure to stocks, be mindful of risks, and adhere even more tightly to investment discipline.


Read the Outlook