Conference Speaker Forecasts Positive GDP Direction for Next Year, but Much Uncertainty Remains

Chris Gaetano
Published Date:
Nov 19, 2020
Jodie Gunzberg

Jodie Gunzberg, managing director and chief investment strategist at Graystone Consulting (a Morgan Stanley company), who gave the keynote speech at the Foundation for Accounting Education's Alternative Investment Conference Thursday, projected gross domestic product (GDP) growth in 2021 and the years after, but said the outlook remains somewhat uncertain, given the coronavirus.

In conversation with Valerie Wong Fountain, Managing Director and Head of Signature Access and Single Family Office Advisory at Morgan Stanley, Gunzberg said that while some of the energy from the summer's partial recovery is fading, she still expects the momentum it generated to sustain another recovery until a vaccine becomes available next year, at which point, she said, GDP should lift by about 6 percent by Q4, compared to this year.

"The vaccine is really important because it encouraged increased labor force participation, while a faster pace of economic output will create plenty of space for new entrants in the labor market," she said. "So that brings unemployment down to 5.1 percent ... in Q4 2021, and we're estimating 4 percent in Q4 2022, which again matters for the growth in labor income." She added the caveat that Morgan Stanley's estimates are "well beyond consensus."

Gunzberg said later that the recovery would be even stronger if the Democrats manage to take control of the Senate via the Georgia special elections, as opposed to what would happen with a divided Congress.

"The main thing we look at is how strong and fast can the fiscal stimulus get passed, and if there is a blue wave, we should expect the fiscal stimulus package to be passed more quickly," she said. "And that will be more supportive of our recovery and ... will really help bridge that gap to get us through the pandemic. That would support more of the smaller businesses, help individuals get through this time, and I think it would be more bullish than if we see this divided Congress." 

Of course, she also mentioned that COVID-19 remains "a key downside risk." If shutdowns are more broad and longer lasting than expected over the winter, and if the vaccine is delayed, and if there is no future stimulus on the fiscal side of things, then she expects a more drawn-out recovery, with longer stints of unemployment and greater permanent job losses.

She also noted that, historically, the U.S. dollar tends to significantly weaken in the six months prior to a new president being inaugurated, and stays flat for about six months after, and that this happens regardless of which party controls the White House. This does not necessarily bode ill, though, as she said that in a weak-dollar environment commodities (because they're priced in U.S. dollars) tend to do well, as well as real assets such as infrastructure.

Similarly, she said, regardless of which party is in power, stock market performance tends to rise by 4 percent during a new president's first year in office, and so she said investors should plan accordingly.

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