The U.S. and Global Economies: Overcoming the Pandemic.

• Author: Barkey, Patrick M.
• Position: THE U.S. ECONOMIC OUTLOOK

With the welcome news of real progress on the deployment of an effective COVID-19 vaccine and the conclusion of a bitter political election comes a tentative new optimism for the economy in 2021. IHS Markit, a global forecasting company now projects a return to the U.S. economy's pre-pandemic growth path by the end of 2021, a significant revision from the more pessimistic assessments being made last summer.

It has been an extraordinary event, with an extraordinary policy response, both in addressing the economic and public health crises. The two are closely linked--unanticipated shortcomings in the rollout of the vaccine could make some of the optimism misplaced, but a more rapid decline of COVID-19 concerns could make actual growth surpass the projections. Meanwhile, the fallout from the aggressive monetary and fiscal policy responses to the economic collapse will rise higher in the list of challenges to be addressed in a post-pandemic future.

Here are the top 10 predictions for the U.S. and global economies courtesy of our friends at IHS Markit:

1. While the COVID-19 virus will stay with us, effective treatments and vaccines will be widely available to large segments of populations by mid-2021, facilitating a transition to the post-pandemic economy.

2. The global economy will enter 2021 at a subdued growth rate and accelerate to a brisk pace in the second half. Growth in Asia will lead, while growth in some corners of Europe (most notably the U.K.) will lag.

3. In 2021, the focus of investors and policymakers will shift from COVID-19 to the environment. Expect to see increasing appetite and availability of investment opportunities with more of an environmental, social and governance focus.

4. Monetary policies will remain accommodative, and more central banks will lean toward the U.S. Federal Reserve's flexible average inflation targeting (FAIT) policy.

5. The global financial sector should avoid major crises in 2021--at least in advanced economies--but banking risks will rise. This is particularly so for banks with exposure to the debt of countries that have the heaviest debt burdens relative to the size of their economies.

6. Finished goods prices will accelerate in 2021. Price increases in a broad category of physical goods, already apparent in input prices, will show up in products this year. Prices of services, which been pushed down by depressed demand, will stabilize.

7. The U.S. economy will start 2021 slowly and accelerate in the second...