A trader works on the floor of the New York Stock Exchange during the afternoon of December 4, 2015 in New York City.
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Stocks fell from all-time highs on Friday as the market digested better-than-expected earnings results from key companies, Biden’s spending plans, and US economic data that indicates potential inflationary pressures to the economy.
On Tuesday, the Conference Board announced consumer confidence jumped to a 14-month high of 121.7 in April, from 109 in March. And on Thursday, the Commerce Department said US GDP grew around 1.6% in the first quarter of 2021, or 6.4% on an annualized basis.
Although growth during this period marked the second-fastest pace for any quarter in the US since 2003, GDP could grow even faster, with the pace likely reaching 8% this year, according to Andrew Garthwaite, a global strategist at Credit Suisse.
Since consumers have around $1.9 trillion in excess savings and are changing their spending behaviors on the back of increased confidence in their wealth, US GDP could grow by 1% to 2%. Additionally, Biden’s first fiscal package is likely to boost GDP by 6%, while the second and third packages could raise GDP by 1% to 2% per year, he said.
And even though Biden’s second and third packages still have to pass the House before being signed into law, there are growing concerns about the inflationary pressures that might arise from Biden’s massive spending plans and the Fed’s ongoing dovish stance.
“We think US 10-year yields will rise to 2% with the bond yield rising to 20bps in the next 12 months; critically we expect this to be led by inflation expectations rather than real yields,” he wrote, adding that the TIPS yield (which