NEW YORK (AP) — With the U.S. economy humming, corporate profits flowing and stock prices peaking, investors on Wall Street are beginning to pose an anxious question: Is it all downhill from here?
Financial markets are always trying to set prices now for where the economy and corporate profits are likely to be in the future. And even though readings across the economy are still at eye-popping levels, investors see some areas of concern.
New variants of the coronavirus are threatening to weaken economies around the world. Many of the U.S. government’s pandemic relief efforts are fading. Inflation is raging as supplies of goods and components fall short of surging demand. And the beginning of the end of the Federal Reserve’s assistance for markets is coming into sight.
So far, investors have largely put aside nervousness — broad measures like the S&P 500 and Nasdaq composite are hitting record highs. Major stock market averages, in fact, have nearly doubled since bottoming in March 2020.
The U.S. recovery from the recession is proceeding so quickly that many forecasters estimate that the economy will expand this year by roughly 7%. That would be the most robust calendar-year growth since 1984.
Outside the U.S., too, economies are showing sustained growth. The Chinese economy, the world’s second-largest, has slowed sharply from last year, though Beijing said it grew nearly 8% in the April-June period. And among the European countries that use the euro currency, growth for 2021 is expected to reach a brisk pace of nearly 5%.
Still, some sharp moves underneath the stock market’s surface and across other markets show newfound hesitance and anxiety about the potential economic threats. Yields on longer-term U.S. government bonds have sunk, for example, while stocks of companies most closely tied to the strength of the economy have slumped.