Business News: ETFs win on huge GDP growth in US first quarter.
The US economy grew at an annual rate of 6.4% in the first quarter of 2021. This far exceeded expectations of 6.1%, after an increase of 4.3% in the previous three months. Apart from the increase induced by the reopening in the third quarter of last year, the most recent reading was the best period for GDP since the third quarter of 2003.
The increase in private consumption, fixed investment in residential and non-residential buildings and public spending more than offset the decrease in stocks and exports. Consumer spending, which accounts for more than two-thirds of US GDP, increased by 10.7%, compared with a 2.3% increase in the previous period. Spending on goods increased by a whopping 23.6%.
Consumer spending optimism was the weak spot in the first quarter US GDP growth report. Gregory Daco, US chief economist at Oxford Economics, expects consumer spending to increase by more than 9% this year, a record, the New York Times quoted.
A solid resumption of large-scale economic growth and accommodative monetary policy bode well for growth stocks across all spectra. Meanwhile, such optimism would increase bond yields to some extent, boosting the market’s value angle as well. Overall, this is a great scenario for mixed stocks and ETFs like SPDR S&P 500 ETF SPY.
Banks are in the sweetest position as large household savings have dominated fears of loan defaults or defaults in the banking sector. In any case, the banking sector is currently an undervalued sector.
Consumer penchant for purchasing durable goods such as motor vehicles and home appliances (up 41.4% in the first quarter) puts the semiconductor ETF VanEck Vectors Semiconductor ETF SMH in a decent position. The chips are used in automotive and large electronic items. Therefore, demand for chips – which is currently seeing supply tightening – should be upbeat for the year.