The Haves & The Have Nots

SGH Wealth Management’s “Read What I’m Reading” May. 2021 | May. 7th, 2021

As the light at the end of the tunnel inches closer toward normalcy, the contrasts of economic fortunes between the US and Europe are becoming more apparent. Real GDP in the US grew by an annualized rate of 6.4% in the first quarter of the year and is on top of a 4.3% growth rate in the fourth quarter of 2020.  This first quarter statistic is the second-fastest pace of growth since 2003.

The Bureau of Economic Analysis noted that personal consumption spending, business investment and federal, state and local government spending were all contributors to the growth.  The most eye-popping number: disposable personal income increased 67% in the first quarter, compared with a decrease of 6.9% in the fourth quarter of last year. This could mean good news for Cyclical Stocks if Americans get back to spending as they used to.

Meanwhile, the euro zone economy saw its gross domestic product decline by 0.6% in the first quarter, and in sharp contrast with the U.S., this was the second consecutive quarter of contractions.  Germany’s economy fell by 1.7% in the first three months of the year, Italy showed a contraction of 0.4%, Spain and Portugal saw their economic activity shrink by 0.5% and 3.3%.

As the US Fed and Treasury debate what to do next to fight against potential inflation, these numbers highlight the differing world approaches to economic trauma. With Europe’s recovery running several months behind the United States this could give a sizable head start for the re-opening of the world.

Our Detroit founder, Sam Huszczo, CFA, CFP was asked to return to the Claman Countdown to discuss Apple Stock and if Tech Stocks are becoming too risky of an investment in the first link below: