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Off to the Races: GDP, Inflation, and the Labor Market
Manage episode 480748896 series 2815319
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In this week's episode, our investment experts explore three major themes from the week: negative real gross domestic product (GDP) growth, inflation, and the labor market. We discuss how these factors affect equity and bond markets, and overall sentiment regarding the economy. We also consider if the relatively positive news from this week continues into the weeks and months ahead, or if the full negative impact of tariffs will make for a sobering summer.
01:51 – The advance estimate for the first quarter of 2025 real gross domestic product showed a 0.3% decrease, signaling the first negative quarter since early 2022.
03:02 – The Bureau of Economic Analysis released favorable data on PCE inflation, which was relatively flat month-over-month, and showed year-over-year growth of 2.3%, which was lower than both January and February.
03:57 – The labor market has a cautiously optimistic outlook based on this week’s Job Openings and Labor Turnover Survey (JOLTS) report, weekly unemployment claims, and better-than-expected growth in new nonfarm payrolls, which gave the markets a bump this morning.
09:13 – Expectations of an early rate cut in June from the Federal Reserve are falling as a result of the positive jobs report. Bond investors feel that future employment reports will be less optimistic, and are thus buying on the dip.
11:36 – Changing tax policy will likely be making news soon, especially on the question of tax-exempt status for universities, though existing bonds are unlikely to be affected.
14:09 – Equity markets hit a 20-day high following a handful of better-than-expected earnings reports this week, mostly from the technology sector.
15:34 – Volatility continues to decline from recent highs, and credit markets appear healthy as evidenced by tightening BBB versus BB credit spreads.
Additional Resources
Key Questions: What Is the Mar-a-Lago Accord and Why Should Investors Care? | Key Private Bank
Key Questions | Key Private Bank
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