By Alex Dixon, YouCanTrade
The United States officially has more people who have received at least one Covid-19 vaccine dose than people who have tested positive for the coronavirus. Because of this, the Federal Open Market Committee (FOMC) is expecting “very strong” US economic growth in 2021, according to St. Louis Fed President James Bullard. With the theory of “rising tides lift all ships,” the economy going in one direction will likely pull most stocks and companies to higher values. Adding one more odds enhancer, the overall direction seems to be to the upside.
In addition to what the FOMC has reported, the Federal Reserve’s policymakers have announced they plan on keeping interest rates at current levels until at least 2023. This is a move designed to encourage lending and economic growth. These low interest rates combined with government stimulus creates monetary and fiscal policies aimed to push the overall economy up.
The Congressional Budget Office has projected a 4.6% growth in the US economy after contracting 3.5% in 2020. The CBO’s projections in July 2020 were a 4% real GDP growth after a 5.8% contraction in 2020.
Keep these things in mind as you make your trading plan and place your trades. As traders, we can take this information and use it to our advantage. “Don’t fight the Fed.” This is a popular saying among traders to remind us the economy, and market, is likely to go where the Fed wants. It seems there is a lot of lending and political pressure to send the economy to the upside. Trading with the trend is like swimming with the current, it’s just easier.
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