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U.S. Economic Outlook for 2021

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We added some distinctly “2020” phrases to our vocabulary: social distancing, flatten the curve and reopening the economy, to name a few. In addition to the obvious toll of the pandemic – both on human life and the financial hardships it has created for millions of Americans – the changes to our daily routines that we’ve adopted also impacted the U.S. economy and, more briefly, the U.S. stock market. While 2020 had its challenges, we’ll explain why a new year could bring some much-awaited shifts for the better. 

A market recap of 2020: The year started off looking promising, with the S&P 500 rising to an all-time high on February 19. But then fears about the coronavirus pandemic hit and stock prices began sliding down – and quickly. This index plunged 34% into a bear market in March. (A bear market is defined as a decline of at least 20% from a recent high.) 


The S&P 500 could reach 4,300 by the end of next year.


The U.S. stock market turned around relatively quickly, though; the slump lasted just 33 days. By late March, stock prices were climbing higher once again, and in August, the S&P 500 beat its pre-pandemic high. The S&P’s 2020 gains were “remarkable” given the market’s volatile journey earlier in the year, notes the portfolio strategy team at Goldman Sachs. And the benchmark continued to notch new highs heading into the end of last year.

Market forecast for 2021. The stock market could be due for more gains ahead. According to the Goldman Sachs Research U.S. equity outlook published in November, the S&P 500 was predicted to rise to a level of 4,300 by the end of 2021. That’s a potential gain of more than 14% from where this index closed at the end of 2020.


Goldman Sachs estimates the U.S. economy to grow 6.4%  in 2021.


What to expect in the economy in 2021: Although the National Bureau of Economic Research, which tracks the U.S. business cycles, has yet to call an end to the recession that began in February 2020, economists at Goldman Sachs have a positive outlook for the year ahead. They note that the economic recovery has been “rapid and resilient” so far, and as of early January, they predicted that U.S. GDP will grow 6.4% in 2021. What’s more, the economists noted in mid-December that “signs of long-term damage to the economy remain surprisingly limited so far.” 

Back to work. In the early weeks of the pandemic, 25 million Americans suddenly lost their jobs. While job losses continue to be a difficult aspect of the pandemic, a very high share of those job losses were temporary layoffs, which are “historically a reliable signal of rapid recovery,” Goldman Sachs economists point out. And as of early January 2021, they forecasted the unemployment rate – which was as high as 14.7% in April 2020 – could be 4.8% by the end of the year.

Put it on the card. Remember live music? Or the middle seat on a long flight? With so much of our pre-pandemic lives on hold, the Covid-19 vaccine will give the economy a boost, helped by another round of stimulus checks, Goldman Sachs economists note. Many Americans who saved money – thanks to fewer ways to spend it for so many months – are also expected to shell it back out once opportunities fully return. Finally, the economists note that “pent-up demand for services” and accumulated savings will provide “a tailwind” to the economy ahead. 

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.