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Concerns are swirling about a stock price crash ahead of the first gross domestic product (GDP) achievement (GDPIndeed, investors will be hoping for signs of life in the GDP report as Wall Street appears to be on the brink of a potentially brutal correction.
So what do you need to know about this month’s biggest economic release?
Now, the first quarter GDP report should provide insight into whether the country’s economic growth manages to stay on track despite restrictively high interest rates.
If you recall, in the fourth quarter of 2023, US GDP grew at an annual rate of 3.4%. This was a slowdown from his 4.9% in the third quarter, but still quite strong, especially given the contractionary monetary policy in place.
As stocks have continued to fluctuate since the beginning of the second quarter, GDP has an even heavier burden of proving that the country is not headed toward recession, or at least a severe decline.
of S&P500 Its value has fallen nearly 5% since early April as investors lose faith that the U.S. Federal Reserve will cut interest rates in a timely manner. It is clear that this has dampened investor sentiment dramatically. CNN’s The much-watched Fear and Greed Index recently entered the “fear” zone for the first time since November 2023.
It is worth noting that this GDP report is actually an advanced reading material. Final Q1 GDP numbers are expected to be released in June, but there are typically no major adjustments from preliminary reports to final numbers.
Wall Street holds its breath as stock market crashes after important GDP report
The Atlanta Fed’s GDPNow forecast model currently estimates GDP growth for the first quarter of this year at 2.9%. This is relatively in line with Wall Street forecasts, as high interest rates are likely to weigh on production and economic growth from the fourth quarter of 2023 onwards.
That said, some economists are a little more pessimistic.
In fact, according to a poll conducted by economists, bloomberg A survey earlier this month predicted average GDP growth of just 1.9% in the first three months of this year. If that happens, it could raise concerns that the country’s economic growth could deteriorate into a recession as the Fed continues to hold off on cutting interest rates.
As always, impending economic reports could have a significant impact on the Fed’s policy trajectory. If U.S. economic output is strong enough, it will likely give the Fed further ammunition to hold off on cutting interest rates. Conversely, if the first quarter is significantly lower than expected, the central bank could move slightly closer to cutting interest rates.
With unemployment and consumer spending remaining strong, economists generally think the Fed may not start cutting rates until the summer.
“The strong economy is preventing inflation from continuing on a disinflationary trajectory, which means the Fed will have to wait to cut rates,” said Kathy Bojancic, chief economist at Nationwide Mutual Insurance. Bloomberg.
On the date of publication, Shree Dua did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer and are subject to InvestorPlace.com Publishing Guidelines..
