As the wild ride of 2020 comes to a close, I’m hearing a lot of talk about what the economy might look like next year. I don’t have a crystal ball, but the Fed appears willing to keep the rates down in the less-than-1-percent range and let inflation run wild for a bit north of 2 percent. This is the mandate, but has it not been maintained consistently over the last decade. Rates rule.
Lumber prices are through the roof. Trade contractors and vendors are not as aggressive as they once were. Cap rates are holding firm to where they were at the beginning of this year, and of course the Dow and S&P are reaching records. Deal making is on the rise. This all points to a decent 2021.
The markets can tell you a lot about the state of the economy, but sometimes a grass roots approach can clarify the picture. This week, I was talking to a pilot who manages eight private airplanes, and he says that his business is really picking up. (Forget that I counted 106 Delta planes parked on an unused tarmac of our airport on Tuesday.) Everyone in my FMI peer group–folks from New York, Philadelphia, Chicago, Orlando and Seattle–has strong backlogs for next year.
It seems that certain real estate sectors are going to take a while to come back, but things look steady. Residential construction in many areas is off the charts good. Unemployment is coming back to the 7-8 percent range. Despite the ongoing pandemic, aggregate measures indicate the economy gradually converting. It would seem that in another four quarters we should be back to a GDP that’s similar to the beginning of 2020. I think 2021 is going to be an exciting time.