Blockbuster GDP Report – October 29, 2020

First quarter Gross Domestic Product (GDP) fell at an annualized pace of 5%, which was followed by a 31.4% decline in Q2, the worst ever recorded.

Economists are expecting a sharp rebound in Q3 GDP, which will be released Thursday.

• The Atlanta Fed’s GDPNow model pegs growth at 35.3%, more than double the previous record set in 1950.
• The consensus forecast offered by Econoday: 31.9%

GDP is a rearview mirror look at the economy: July – September.

We’re set to enter November. Nonetheless, the rebound has been far stronger than nearly anyone had predicted back in May and June. It can’t be dismissed.

Investors corner

Investors are forward-looking, attempting to discount the economic fundamentals 6 to 9 months ahead. Today, however, the outlook is unusually murky given the many variables that will affect the economy near term.

The economy can’t keep growing at Q3’s rate. Much of the bounce occurred as companies reopened, furloughed workers came back to work, and consumers started spending again thanks to government cash and a resumption in paychecks.

We’re a long way from fully recovering from the Covid Recession, but significant progress has been made. Many but not all economists argue that another round of fiscal stimulus is needed.

Investors have been trading on stimulus headlines, and we may see a deal after the election.

The Leading Economic Index is signaling a moderation in growth, but leading indicators aren’t pointing to a double-dip recession.

Created 2020-10-29 17:30:26