August 2021 – Bond Market Review

While some pockets of the economy remain dislocated, US real gross domestic product (GDP) has recovered to pre-pandemic levels. The recovery has been fueled by robust fiscal spending, accommodative monetary policy, and vaccinations. These factors are beginning to moderate but should continue to provide tailwinds for the economy in the coming quarters. COVID-19 infection rates in the US have reaccelerated up but remain well below their peak. Nevertheless, the surge in infection rates will likely disrupt expectations for a full economic reopening this fall. Some pandemic-related fiscal relief has started to phase out, but an infrastructure spending plan is likely on the horizon. Meanwhile, the Federal Reserve remains accommodative and continues to facilitate further improvement in the labor market. Estimates for US GDP growth remain strong. The current Bloomberg consensus estimates for 2021 and 2022 US GDP growth are 6.5% and 4.2%, respectively.

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