The economy will “go crazy” this summer. There is not a day that goes by in which we do not hear an economic forecast with an extreme optimism based on pent-up demand.
The argument certainly appears plausible and is widely subscribed to by professionals. To wit, JP Morgan: “we expect consumers to blowout expectations for the rest of the year.” Per Business Insider: “Goldman Sachs raised its forecast for 2021 US gross-domestic-product growth to 6.8% from 6.6%.”
To help put context around whether the economy will “go crazy,” we focus on consumer spending habits during the lockdown and the financial means which drove those habits.
If the “go crazy” scenario is correct, monetary velocity will rise and ignite a powder keg of money supply. Inflation could ramp up beyond levels that comfort the Fed and/or markets.
The optimistic forecast appears, at first blush, good for stocks. We make the case that his thesis may signal springtime for the hibernating bear.