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The U.S. economy may be entering a modern-day version of the “Roaring ‘20s,” according to UBS strategists. In a recent note to clients, the bank suggests that current economic conditions mirror those of a potential optimistic scenario reminiscent of the economic boom of the 1990s.

Key factors for this potential “Roaring ‘20s” scenario include strong GDP growth, moderate Inflation, and stable Interest rates. Sustained growth above 2.5%, Inflation between 2-3%, and a Fed funds rate of around 3.5% are seen as necessary, along with robust capital expenditure and AI investments to boost productivity.

Recent revisions to GDP and GDI point to stronger consumer demand than previously estimated, with real GDI growth adjusted upwards for 2022 and 2023. This demand shock has helped drive economic performance and mitigate recession risks.

The Federal Reserve’s recent actions are also seen as supportive of a positive economic outlook, with rate cuts and a focus on full employment while Inflation eases. However, challenges such as a cooling labor market and sluggish manufacturing activity could pose risks.

Despite potential hurdles, UBS remains cautiously optimistic about the likelihood of a “Roaring ‘20s” scenario unfolding. The question now is whether the favorable conditions will persist long enough to sustain economic prosperity.

As we approach the mid-2020s, with post-pandemic normalization underway, there is growing confidence in the possibility of a “Roaring ‘20s” economy taking shape. Continued improvements in both demand and supply, along with favorable monetary policy, suggest a path towards sustained economic growth in the coming years.

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