The latest round of economic data is in, from Q1 corporate earnings to GDP and CPI data. The core indices have been largely flat, but as of this video, the S&P has been up 9% year-to-date. Therefore, it is only natural that we’ve received a lot of questions, especially “have we changed our minds” on the state of the economy and the markets?
My short and definitive answer is “no,” because the data doesn’t support it.
Many factors influence our market position, and it is hard to find a silver lining anywhere right now. The latest round of earnings has been polished because many of these companies have reduced their revenue expectations already and cut costs, including jobs, to get to this point.
Another critical number revised multiple times before the report was GDP, which missed BIG. The final number was 1.1% which missed the expectation by 90 basis points. We believe that this clearly indicates an economy that is decelerating faster than the Feds have expected.
Even with GDP decelerating quickly, CPI remains higher than expected, which shows inflation is sticking around and well above the Federal Reserve’s target of 2%. Taking a macroeconomic look at the market, we believe the latest round of data confirms we have entered a recession and that the economy will continue to decelerate in Q2.
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