Cycle Watch July 2021: Keeping pace

At we start the second half of 2021, the gaps between the current level of economic activity and full-employment levels remain large but are shrinking. That indicates the economy should still be able to grow at an above-trend pace for at least another year. Expectations remain high for a surge in activity in coming months in response to pent-up demand and the return of in-person events. In the markets, stocks broke out of a tight trading range to reach fresh record highs at the end of June. The factors impacting the stock market remain consistent, with the bulls pointing to the fiscal and monetary backdrop, economic re-openings and accelerating earnings. Bears are focused on inflation pressures and elevated valuations.