About this episode:
It’s our halftime show! In this episode, members of the Investment Research team including Chief U.S. Economist Lara Rhame, Managing Director, Investment Research, Rob Hoffman, Director, Investment Research Kara O’Halloran and Director, Investment Research Andrew Korz gather to discuss their predictions for Q3 2021 and reflect on a few of their Q2 outlooks.
Kara O’Halloran (00:04):
Welcome back to FireSide, a podcast from FS Investments. I’m Kara O’Halloran, Director in our Investment Research team. And today is our halftime show. It is July 7th. We are somehow halfway through 2021. So my team is here. We are in person live in the office with me to go through the highlight reel from the first half of the year and talk about what we can expect going forward.
Kara O’Halloran (00:27):
In the room, we have Andrew Korz, another Director on the team and our resident real estate expert. We have Lara Rhame, who if you have listened to the podcast before, you know her and love her by now. She’s our Chief U.S. Economist. And if we‘re going to keep with our sports theme, we have our coach, the head of our Research team, Rob Hoffman.
Kara O‘Halloran (00:44):
Lara Rhame (00:45):
Robert Hoffman (00:46):
Andrew Korz (00:46):
Kara, good to see you.
Robert Hoffman (00:48):
Kara O’Halloran (00:48):
Good to see you. Good to be seen, I should say.
Andrew Korz (00:49):
Nice to be here with everyone in person.
Kara O’Halloran (00:52):
Exactly. So let’s get into it. When we left things off after the first quarter, we can kind of see this light at the end of the tunnel. Vaccinations had started but we are still a ways off from what we would all consider normal. The theme that we talked a lot about was optimism.
Kara O’Halloran (01:08):
And it’s crazy to me at least how it seems like in the last three months, we have really gone almost back to normal, at least here in the U.S. So turning to what this means in the economy, we’re still seeing a really strong economic environment, strong growth rates forecasts and record earnings. It’s created a really good backdrop for markets as well.
Kara O’Halloran (01:27):
The S&P 500 is up 15% in the first half of the year in credits. Spreads have basically returned to pre-great financial crisis levels and fundamentals are rapidly improving in real estate. There are definitely challenges that come with this new normal, and we will dive into all of those.
Kara O’Halloran (01:45):
But first, let’s catch up on how we got here. So Lara, I’m going to ask you to kick us off. I think this is a tough question because so much has happened in the last quarter, but just fill us in broadly on what is going on in the economy and how do we get to where we are.
Lara Rhame (01:59):
Absolutely. And Kara, it’s great to see you too. This couldn’t be better timed. Yeah, first half of the year, I think we really just think about so many tailwinds building upon each other to just push our economy higher to really stratospheric levels of growth. Policy supports. I think it seems, again, things are moving so fast like just a memory but we got that third really large physical stimulus package that really hit households in the first quarter.
Lara Rhame (02:37):
Obviously, the vaccines have allowed large flocks of activity to resume. And then you had continued Fed easing and all of that is just combined to push, we don’t actually have Q2 GDP numbers yet, but the estimates are for 10% growth in the second quarter. It’s just for an economy as mature as ours, don’t call it old. Call it mature. That’s a really astonishing rate of growth.
Lara Rhame (03:05):
And that’s, I think, where we’ve left off. And just to tickle some thought going ahead, we maybe sort of now turning a corner from that extremely, extremely robust rate of growth. But that’s where we are right now, just rock solid across the economy, labor market, housing market, travel and services recovery, consumption, all of it. Business investment is just firing in all cylinders.