6 Reasons the Economy Isn't Going to Crash Anytime Soon: Greg Valliere

Slideshow July 20, 2021 at 04:20 PM Share & Print

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A host of factors — including a big hike expected in Social Security payments — will keep the economy humming along, according to Greg Valliere, chief U.S. strategist for AGF Investments.

“We’ve always believed that the key to a solid economy is real disposable income — the amount of available cash in people’s pockets,” Valliere said Tuesday in his Capitol Notes email briefing. “This supports our view that the current outlook is very solid, despite yesterday’s panicky reaction to a Covid spike.”

The markets, Valliere contends, “are overlooking several factors that will keep real disposable income — and the economy — in very good shape.”

Click through the gallery above for six factors Valliere says will support a healthy economy.

Melanie Waddell

@Think_MelanieW

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1. Gasoline prices are headed back down.

Perhaps sharply, as oil prices plunge after the OPEC production agreement. Americans who worry about inflation cite gasoline prices as their biggest concern, but by September they could be 10% lower than they are now.

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2. A huge hike in the child tax credit.

The March stimulus bill set a maximum credit of $3,600 annually for children younger than 6 and $3,000 for those between 6 and 17. The regular child tax credit had been $2,000 annually for children under 17.

In households with joint income under $150,000, the full benefit will be $300 extra per month for children under 6 and $250 for those between the ages of 6 and 17. Many households with three children are now getting $800 monthly checks, a stimulus that is likely to be continued well into this decade.

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3. A big hike in Social Security payments is expected.

It’s likely that the annual cost of living rise could be about 5%, based on current inflation trends. The final number will be released in late October, and the higher benefits will take effect in 2022.

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4. Rock-bottom bond yields.

With the Treasury 10-year bond yielding less than 1.3% now, another wave of mortgage refinancing appears likely. And the housing boom, which was starting to look tired, could revive — stimulated by ultra-low rates.

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5. Fiscal stimulus.

An infrastructure deal could hit a snag for a few days. But more spending is coming, even if infrastructure bills stall, as Congress debates the fiscal 2022 budget, which almost certainly will pass by late this year.

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6. More hiring.

A boost in real disposable income seems very likely as desperate employers in the service sector continue to offer higher wages and sign-up bonuses.

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