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Massive Rebound Ahead In '21: KKR Report

The global economy will soon enter a strong growth phase, fueled by a combination of positive drivers that haven't aligned in decades, according to a new report to investors

A team led by Henry McVey, private equity giant KKR & Co.'s head of global macro and asset allocation made the findings. The upswing will drive U.S. real estate markets as well.


As the coronavirus pandemic recedes, the impact of government stimulus measures around the world, including efforts in the United States, will continue to be felt, along with an array of other factors that will grow the U.S. economy and other national economies worldwide.

"The consensus for 2021, by comparison, is 3.8% [U.S. GDP growth]," the note predicts. "Beyond pandemic recovery, other powerful growth tailwinds include the housing boom, wealth effects, monetary stimulus, low commodity costs, excess savings and lean inventories."

Consumers will pitch in as well, perhaps providing some relief to the retail sector, though the report doesn't specifically predict that.

“We think the potential magnitude of this spending power could be underestimated, as consumers at the high end have benefited from increased rates of savings, while those at the low end have been supported by generous government transfers,” it says.

The report also encouraged investors to increase their exposure to certain kinds of assets, including infrastructure, real estate equity and real estate credit. 

"We can’t pound the table harder on this call, especially given the crosscurrents of existing low rates coupled with a surge in the global money supply," KKR says, adding later in the note that "many parts of real estate should perform well in the faster nominal GDP environment we are envisioning."

KKR isn't the only prognosticator predicting strong economic growth ahead once the cloud of the pandemic disperses. The prospect of another "roaring '20s" has already established itself as a forecasters' cliche. Some of them point out that the recovery from the 1918 pandemic is thought to be a factor in the boom of the 1920s, and there will be a similar dynamic in the 2020s.

CBRE forecasts that the strongest U.S. GDP growth of next year will occur during the second and third quarters, coming in at an annualized rate of more than 5.5%  and 5.6%, respectively. That kind of growth would bring U.S. GDP back to pre-pandemic levels by Q3 2021. 

CBRE expects the real estate recovery to lag that of the broader economy, especially in the hard-hit office, retail and hotel sectors. But they too will begin to recover by the end of next year.

Even the restrictive measures taken in some places during the pandemic, such as business closings, aren't likely to cause permanent economic damage, as renewed demand revives the sectors of the economy most affected by such measures, such as restaurants, live entertainment and other businesses that depend on personal contact.

"Will more restrictive NPIs [non-pharmaceutical interventions] have longer-term adverse effects on the California economy?" the UCLA and Anderson Forecast for the Nation and California asks.

"There is not a lot of evidence to work with, but recent studies of the 1918/1919 Influenza Pandemic suggest the opposite ... A research project by economists at the Federal Reserve and MIT found that over the course of the influenza pandemic, NPIs had no statistically significant impact on economic activity," the report says.

California's tech sectors, along with residential construction and logistics, will lead the recovery, UCLA predicts, and post-pandemic, the state economy will once again be growing faster than that of the United States as a whole.