Infrastructure Spending Will Further Bolster the Economic Outlook

Aug 13, 2021 | Nick Scholte


Recession is nowhere in sight. Economic indicators of all stripes show this to be the case. A $1.2 trillion infrastructure plan passed with bi-partisan support by the U.S. Senate, and seemingly destined to become law, will further fuel the expansion.

Reminder: I am away from the office for the next two weeks. There will be no weekly updates written during my absence. Next scheduled update will be Friday, September 3rd. I will be connected while away and will monitor economic and market events as warranted. As usual, please reach out to Brenda with any urgent inquiries.

It was an up week for North American stock markets with the Canadian TSX finishing up 0.2%; the U.S. Dow Jones Index up 0.9%; and the U.S. S&P 500 up 0.7%.

As I have repeatedly suggested in recent weeks and months, recession is nowhere in sight. Most often I support this assertion by referencing the “Big 3” economic indicators of: the monthly Employment Report; the ISM Manufacturing Index; and the ISM Non-Manufacturing Index (i.e. “Services”). All of the “Big 3” indicators are at, or near, historical highs for these metrics. In addition, I will occasionally make note of the trend in weekly jobless claims which may be RBC Dominion Securities’ favourite leading indicator of recession. This trend continues to decline which, for this measure, is the preferred direction. Interestingly, our partners at RBC Global Asset Management, led by Chief Economist Eric Lascelles, put out their own, more granular, assessment of what stage the business cycle might be in. As can be seen in the accompanying table, the vast majority of these more granular indicators suggest that the economic expansion is in the early to mid-cycle stage:

Also worth noting is the continuing strong fiscal support of the economy. Just this week, a $1.2 trillion infrastructure plan passed the U.S. Senate with widespread bi-partisan support. Given the bi-partisan support, the bill is almost assured to pass the House of Representatives before reaching President Biden’s desk to be signed into law. The passage of such a bill will further bolster the strength and momentum of the economy making recession an even more remote possibility.

Clients will know that, absent recession, my and RBC’s mantra is that equities (i.e. stocks) should be given the “benefit of the doubt”. Accordingly, client portfolios are positioned overweight in equities as I leave for holiday. I will monitor developments while away for any potential change to this outlook.

That’s it for this week. Next update September 3rd. All the best,


Nick Scholte, CIM, FCSI

Vice-President & Portfolio Manager

Scholte Wealth Management
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