Charting Unusual Late-Cycle Fiscal Stimulus in the U.S.

Charting Unusual Late-Cycle Fiscal Stimulus in the U.S.

Charting Unusual Late-Cycle Fiscal Stimulus in the U.S.


With unemployment already low at around 4%, the U.S. shift toward fiscal expansion late in this economic cycle goes against what we’ve seen for much of the past 70 years. As the chart shows, the government has typically spent countercyclically during economic declines to boost hiring and cut unemployment. Today’s fiscal stimulus paired with limited slack in labor markets could spur volatility, given higher risks to both the upside (faster GDP growth) and the downside (rising inflation and reduced “firepower” for policymakers in the next downturn). To navigate these uncertainties, we think investors should focus on strategies offering diversification and the flexibility to respond to changing conditions, potentially moving away from more benchmark-constrained strategies. 

For a further discussion of what late-cycle fiscal stimulus means for investors, see our Quick Takes video, “Is Volatility Here to Stay?

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