The revival of the service sector is critical for a prosperous economy. With the aforementioned top half of the K thriving, we are watching two main things in the coming months: pent-up demand and jobs. economy is improving in a rapid, healthy way, fueled by increased consumer confidence, as well as trillions of dollars in both fiscal and monetary stimulus. To say we are currently in a goldilocks economy is perhaps a bit too soon, but we are certainly heading toward one. As more Americans get vaccinated (over 100 million have had at least one dose to date), the revitalization of the bottom half of the K is expected to accelerate. Over the past year, we’ve emphasized that the virus will determine the fate of the economy. The losers in the bottom half include the service sector of the economy such, as travel, tourism, conferences, concerts, restaurants, and bars. This group captures people and industries that, after a brief pause, survived the depths of the pandemic and eventually thrived in the following months. The goods economy, including retail, autos, and housing, all fall under the winners’ category in the top half of the K. Ultimately, the economy unfolded in what is known as a K-shaped recovery, one that has winners and losers. Economists, analysts, and market pundits scrambled to make sense of the pandemic-induced recession and prognosticate on how the recovery might evolve. To step back, as the COVID-19 pandemic upended the world in March 2020, the economy shifted from the lowest unemployment rate in 50 years to the highest level since the Great Depression in just a matter of months. The K-Shaped Recovery and the Coronavirus However, things can still improve from here, as the economy claws back the pandemic-induced losses and significant positive momentum pushes us toward future growth. The combination of taming COVID-19, increased savings, pent-up demand, and the revitalization of the service sector has led some to say we are in a “goldilocks” economy. economy have forecasters giddy with enthusiasm. For long term yields, the best market condition is one that does not provoke actions by the Federal Reserve, but allows the market to find the balance that is 'just right.The tailwinds for the U.S. The market watches monetary policy closely and usually responds decisively. The name Goldilocks economy comes from children's story, The Three Bears, when Goldilocks proclaims that the porridge is 'not too hot and not too cold…it is just right.' Indeed, with sustained growth and a low inflation rate, the economic is usually considered 'just right.' Why Does a Goldilocks Economy Matter? Therefore, pundits have labeled this balance between a bull economy and a bear economy, the Goldilocks Economy. not rapid or stagnant growth, but sustained growth and a reasonably low inflation rate, it is a comfortable zone for investors to find long term growth and attractive values in various asset classes. In either extreme, the Federal Reserve acts to either cool off or heat up the economy, primarily by raising or lowering the official interest rates. In contrast, a bearish economy is the opposite, with stagnant economic performance and inflation rates soaking up any gains.

A bullish economy, with steep growth in market values and low losses due to inflation, denotes strong economic growth, though it may lead to rising inflation. Market pundits look for ways to characterize the economic climate.