Economic recovery gathers steam

The recovery is expanding but volatility could continue to crop up.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print

Key takeaways

  • In the US, the economic recovery continues to expand.
  • Unemployment remains high and the economy is not at full speed yet, but there are some positives including pent-up demand, support from the government and central bank, and improving confidence.
  • The vaccines for COVID-19 are expected to boost the global economic recovery which has been led by a recovery in manufacturing, though the service industry continues to struggle around the world.
  • The improving economy may be favorable for economically sensitive stocks—for example stocks in the consumer discretionary sector.

United States

  • The US economy appears to be progressing toward the mid-cycle expansion phase, as activity continues to incrementally improve.
  • Elevated COVID-19 cases suggest that service industries and small businesses hit hardest by virus-related restrictions may continue to lose momentum through the rest of winter—but activity remains well above troughs from last spring.
  • Despite high unemployment and a recovery that remains elusive for many, US consumers in aggregate should be positioned to weather a near-term economic lull. Households accumulated more than $1.4 trillion in excess savings during 2020 due to lower spending and income gains from fiscal stimulus.
  • The Democrat-controlled government is inclined toward further fiscal stimulus, including additional emergency funds to support an economy still not operating at full capacity.
  • The near-term trajectory may be more volatile than usual due to elevated virus cases and the uncertain vaccine rollout, but the outlook remains positive, underpinned by pent-up consumer demand, supportive fiscal and monetary policy, improving business confidence and credit conditions, and hopes for reopening over the next several quarters.


  • Global activity continues to improve, led by a synchronized recovery in manufacturing, even as the service industry recovery has been slower amid continued pandemic-related challenges.
  • China has managed an impressive industrial-led recovery following the virus outbreak, although the rate of overall economic improvement is likely to moderate as credit growth slows and the expansion matures.
  • Virus-related lockdowns have slowed Europe’s recovery, but the negative effects are less severe than they were last spring. Major drivers of business cycle momentum, such as business confidence and manufacturing, have remained relatively resilient.
  • Developing economies are benefiting from the ongoing improvement in global trade, but a recovery in services may be delayed due to a slower vaccine rollout.
  • Activity remains below 2019 levels in most countries, but the prospect of a vaccine-assisted full reopening over the coming year should support continued broadening of the global economic expansion.

Asset allocation outlook

  • The improving cyclical backdrop, and the eventual prospect of a fully reopened economy, is constructive for more economically sensitive stocks that tend to do well as activity improves.
  • Financial markets have become increasingly sensitive to and dependent on extraordinary levels of policy support, leaving them potentially vulnerable to a shift in policy or rising inflation expectations.
  • Buoyant asset valuations reflect positive expectations built into asset prices and create the potential for heightened volatility.
  • Portfolio diversification remains as important as ever; the valuations of non-US, small cap and value equities, and inflation-resistant assets appear relatively favorable.

Next steps to consider

Research investments

Get industry-leading investment analysis.

Analyze your portfolio

Find investing ideas to match your goals.

Visit the Fidelity Learning Center

Get recent market insights, read in-depth articles or watch videos to learn more.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be " "

Your e-mail has been sent.

Your e-mail has been sent.

Sign up for Fidelity Viewpoints®

Get a weekly email of our pros' current thinking about financial markets, investing strategies, and personal finance.