US Q3 GDP was 2.1%, so anything below this = slowing of growth in rate of change terms.
I don't see any upside to the above consensus number of 2.0%. I see a lot of potential downside.
The bond market in recent days is front running a combo of weak GDP growth, and #Corona
2/N
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It's hard to know how much the bond market is due to GDP and how much due to Corona. Almost certainly both are having an effect on a huge reduction in 10Y yields from 1.95% (Jan 1) to 1.57% (now). This is a large move in 4 weeks! 3/N
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Recent weak home sales, durable goods, inventories, industrial prod, CAPEX, and some initial cracks in retail (70% of GDP) will be offset by a lower trade deficit (note imports are still -5% YoY and this will work itself into the consumer number). GDP = C + I + G + (X – M) 4/N
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C = Private Consumption (i.e. "the consumer") I = Gross Investment (e.g. CAPEX, change in inventories etc) G = Government Investment (e.g. Infrastructure etc) X - M = Exports - Importans (i.e. Trade Deficit) 5/N
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So you just calculate these 4 components and you have GDP! It's really hard to know these numbers accurately only 30 days after the quarter end, so everyone is estimating, including the BEA. This is why GDP numbers are often revised
@D_Blanchflower = expert on this 6/NPrikaži ovu nit -
It seems really hard to believe that Q4 will be above consensus (and thus 2.1% or more) and equal to Q3 (2.1%), as economic data have slowed. So I think the prudent thing to assume is that there is more downside risk than upside risk to the 2.0% consensus number 7/N
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If you agree & you are overweight in equities then you might want to get some defensive positions (e.g.
$TLT,$ZROZ,$GLD, CASH etc). If the GDP comes in with a 0-handle on the front then even the current S&P will likely find that hard to be bullish about@KeithMcCullough 8/NPrikaži ovu nit -
There is an argument if a really weak number is printed, that S&P might rally as more
#cowbell (i.e. Fed easing = rate cuts and QE) would be coming from the Fed. A 'paradoxic' rally is possible, except one day it won't happen & the market will get 'rekt'@delphicapitalsd 10/NPrikaži ovu nit -
My personal estimate is 1-1.5%, which would be a 'risk off' number, but not a disaster either (look at Q4 2018 = 1.1%). I'd be surprised if it started with a 2-handle, and not that surprised if it has a 0-handle. The GDP number is out at 9:30am EST on 30 Jan. 12/12
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