There are probably only two good answers in response to the question raised in the headline on this piece. The one we believe is that the economy is getting back on track and will grow strong in the months ahead. Now to some that might be a bold prediction, while others see the bar set very low. I can tell you this: The stock market is the best predictor of economic activity and has rarely if ever failed.
You might ask about this past spring, when the markets took a nasty turn as Covid-19 started to spread like wildfire around the globe. Markets took a huge hit just as the economy was buckling under. A 34% drop in GDP still stands as a record for the quarter, but the sharp rebound the next quarter (up 32%) was also a record breaker.
The timing and the quick drop and recovery were clearly not foreseen by the markets back in 2019, but shocks do happen. It is how we adjust to those shocks when our knees wobble that says the most about how we may recover.
So why do I think the market is telling us good times are coming? Remember, the stock market is a great discounting mechanism. It discounts prices about six to eight months in advance. Hence, we can draw a conclusion that today's market action is predicting strong economies around May/June 2021.
Remember, stock prices today are not reflecting the news of the day, but rather trends in earnings and growth out into the future. Hence, when a company reports strong earnings and rises sharply, the markets are estimating the acceleration in earnings to continue. That happened the last couple quarters with Target (TGT) ; you can see the chart and understand.
With stock markets at or near all-time highs it is not unreasonable to believe the economy will be strong in 2021. How things change based on other news events and happenings is not predictable. The message of the market is a strong one -- bullish for now, but cautious of getting to overbought. We are entering the seasonally strong period, so there is wind in the bulls' sails.