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A Closer Look At GDP
My first glance at the revisions shows that the real story may be there.
The Q4 and Q1 figures were revised sharply lower. The Q1 real GDP figure was revised to a miniscule gain of 0.4% (annualized), down from a previously reported gain of 1.9%. The Q4 real GDP annualized growth was also reduced from an originally reported 3.1% to a revised figure of 2.3%
Also the real GDP declines in the heart of the "Great Recession" were revised downward to a significant degree. The Q4/2008 and Q1/2009 figures were originally reported at -6.8% and -4.9%, respectively. The new figures are much worse: -8.9% for Q4/2008 and -6.7% for Q1/2009.
Finally, the revised figures now show that the economy has not fully recovered the GDP losses from the recession. Instead the economy remains below it previous 2007 peak.
Definitely not good news and in my opinion far more meaningful than the fake "debt ceiling crisis".
The market indices will fall sharply at the open as things now stand. It remains likely to me that there will be a rebound.
The news environment has now turned completely negative. Recently various news outlets have summarized the following news items (I paraphrase):
- The debt crisis is a big problem.
- The U.S. may default.
- The U.S. will be downgraded.
- The Greek debt problem isn't solved.
- Spain may be downgraded by Moody's.
- The U.S. economy is grinding to a halt.
- China is slowing.
- European growth will soon or already is disappearing.
- Unemployment in the U.S. remains elevated, restricting consumer spending.
I could go on.
The point is that when the indexes decline and the sentiment becomes so widely negative, the market historically tends to bottom and then rally. The timing of course is imprecise, but I do not think now is the time to become ardently bearish.
Have a good one...
Curt B.
Options Manager: Daily Decision-PRO
S&P 500 - Intraday
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