Q1 GDP for the US gets revised this morning and it’s expected to drop from +0.2% to -0.8%. Why so much worse? Because after the initial report came out it was discovered that exports were actually much lower than expected and that would show up in this revision.
So why aren’t stocks lower on these weak fundamentals?
Because most investors believe it is transitory with better results ahead. That is similar to last year’s first quarter which came in even nastier at –2.9% followed by two straight quarters around +5%.
To be honest, I am not seeing much in the economic data that says we have a gangbuster Q2 on our hands. It’s probably positive, but nothing like the stellar +4.6% rebound as we got in Q2 of last year.
That gets us back to a neutral state of affairs until we get new information that says the economy is heating up or slowing down. Next week will provide the key reports that will move the markets in ISM Mfg, ISM Services and monthly employment data.
It’s simple. If those reports are good, stocks move higher. If they are bad we move lower.
aka Steve Reitmeister
Executive Vice President, Zacks Investment Research