MRM Commentary


Monthly Investment Commentary

September 2021


            • While we expect growth to remain strong, the rise of the delta variant and supply-chain disruptions are creating some headwinds for growth.
            • As a result, the street has lowered gross domestic product (GDP) growth expectations for the U.S. and global economies.

      MRM Group claims compliance with the Global Investment Performance Standards (GIPS®).
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      MRM Portfolio

      Delta Variant
      The current rise in the delta variant, as was the case with previous stages of the pandemic, has made predicting the economy, and many other market variables, more difficult than has been the case in most past cycles. Instead of a gradual slowdown in economic growth, the pandemic led to a sudden lockdown of economic activity. We have slowly climbed out of the hole over the last 15 months, and our work suggests the sun will continue to shine on the economic recovery at least through next year.

      Massive monetary and fiscal stimulus have also played a big role in the speed of the recovery. This has been the case on a global basis as every major central bank on the planet has implemented monetary policies intended to pump stimulus into their economies. We expect the U.S. economy to lead the world economic recovery in the near term but look for some catchup from other major economies and regions as we move into and through 2022.

      Consumer demand remains strong, but global supply-chain disruptions have led to shortages of many raw materials, parts, and finished goods. In addition, labor shortages here at home have been a headwind for the services segment of the domestic economy. These supply-chain disruptions have not allowed companies to build inventories, which has also slowed growth. The rise in the delta variant has also created speedbumps for the global recovery, but we do not believe it will lead to the same level of lockdowns as was the case last year.

      While we expect economic growth to remain well above average this year and next, our expectations for 7% growth this year now appears too optimistic. As a result, our gross domestic product (GDP) growth estimate has been lowered to 6.3%, still strong by historical standards. We are retaining our 5.5% or 6% growth estimate for 2022 as we expect supply-chain disruptions to ease and the global economy to be more synchronized. We see global GDP growth coming in at 5.6%. The global aspect of this recovery is highlighted by the fact that nearly 40% of the revenues for the S&P 500 Index come from outside the U.S. We see the U.S. recovery shifting from short and explosive to a more persistent and that will carry us through the end of next year at least.

      MRM'S VIEW

      Overall, we see a more sustainable recovery that is built on consumer spending and inventory rebuilding taking hold in coming quarters and carrying the economy forward through 2022. We remain bullish.

      Source: Mercer

      MRM model holdings as of June 30, 2021



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