JPMorgan: President Biden's Stimulus Proposal Could Make GDP Surge 11.4% in 2021


President Joe Biden's rescue plan could help reinvigorate the US economy in 2021.

JPMorgan chief global strategist David Kelly believes the plan will have "significant impacts" on the economy and help boost GDP growth.

Biden released the details of the $1.9 trillion stimulus package late last week. Included were $1,400 direct payments, $400 weekly unemployment benefits, and funding for schools and vaccinations. Biden hopes to get the package through congress as soon as possible.

Kelly ran a simulation with a $1.2 trillion spending estimate for 2021 and estimated that it could boost nominal GDP growth to 11.4 percent year-over-year in 2021. Furthermore, he estimates that the package could send the unemployment rate below 5 percent.

"Extended, expanded and enhanced unemployment benefits through September should significantly reduce poverty until the pandemic winds down. Importantly, however, a $400 weekly supplement, as opposed to the $600 supplement in the CARES Act, would give most laid-off workers a financial incentive to return to work when possible," Kelly said. He continued saying that the $1,400 payments would most likely be saved before a spending boom occurred once reopening plans start to catch wind.

Kelly was even bullish on cyclical and financial stocks due to the package. However, he did acknowledge that it could hinder asset performance in the future.

"With current valuations at very high levels, 2021 already looked like a difficult year for financial assets," Kelly said. "On balance, the Biden rescue plan, if implemented, could add to those challenges."

View the Full Story Here.


Economics, Finance and Investing