September 15, 2021

The LJE quarterly forecast has a dual purpose. One is to produce a forecast that accurately captures the economic environment we foresee for the coming quarter. The second objective is to dress up the forecast with a parsimonious and coherent description of the foreseen economic environment. The combined forecast paints the following picture for the coming 12 months: A declining inflation rate and a decelerating pace of economic activity with a strong likelihood that the real GDP will fall below the trend line and the inflation rate below the fed 2% target rate. The forecast adds up to a slowdown in the earnings growth. Add to this the market expectations of higher interest rates, and a not so bullish outlook begins to emerge. Although we expect positive stock market returns, our forecast suggests that a double-digit stock market gain over the next 12 months is a Bridge Too Far.

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