The nation’s economic growth is in for a boost in the second quarter, as parts of the economy most impacted by the pandemic reopen.
Never before has the service sector led the U.S. into a recession or so many trillions of dollars in stimulus have been applied.
But with more Americans vaccinated and more states reopening activities, the economy could sizzle as retailers, restaurants, hotels, gyms and other service-oriented businesses see a sudden surge in demand.
The stock market has been trading higher on these expectations for months. However, if the strong activity results in a better earnings outlook, it could further fuel the rally. The S&P 500 was trading at a record high Thursday, crossing 4,000 for the first time as the new quarter began.
“Some of it is factored in, and if there’s a risk, it’s to the upside rather than the downside,” said Sam Stovall, chief investment strategist at CFRA. “From an economic perspective, we could be underestimating and that could end up providing a bit of a boost to the stock market unless interest rates rise even further.”