US Stock Market First Quarter GDP Range and Market Reaction Expectations

I see many friends asking about GDP data today. I remember writing an article before, but I seem to have lost it, so let me rewrite it.

Beijing time on Wednesday at 20:30 is when the US first quarter GDP will be announced. Last Friday, the market expectation was still 0.4%, but when I checked today, the market expectation has dropped to 0.3%. So, what GDP data will be good for market sentiment, and what will be bad for market sentiment?

I will share my personal judgment, which only represents my personal opinion and may not be correct. Please do not take it as a basis for rights protection.

1. Very positive, this is very difficult, which means exceeding or not lower than the GDP of the fourth quarter of 2024. In other words, the GDP data should not be lower than 2.4%. If such data is released, we can almost disregard concerns about a US economic recession, but current expectations are even below this threshold.

2. Relatively positive, if the GDP data can be above 1%, it means the US economy is maintaining slow growth. Although there is a significant gap compared to the previous value, it can still make the market believe in the possibility of a soft landing for the US economy, and this slow growth may not even put pressure on inflation.

3. Slightly positive, if the GDP data is below 1% but greater than or equal to market expectations, then although the optimistic status of the US economy is low, it still falls within the category of slow growth. However, investor confidence in a soft landing may be insufficient, and tariffs may still be needed to adjust sentiment.

4. Long and short game, if the GDP data is below expectations but still greater than zero, it is a positive number. Although it is not favorable for market sentiment, it has not yet entered a pessimistic state. If Trump implements new policies or the Federal Reserve takes early interest rate cuts, it will still help market sentiment.

5. Negative, if the GDP data is below zero, it will definitely be below expectations as well, but above -1%. In this case, the market is likely to begin entering a trading recession phase, which is not good news for investors. For example, if US stocks fall today, it is very likely that investors are taking hedging actions. In this situation, the Federal Reserve may indeed start cutting interest rates in June to try to curb the recession.

6. Highly negative, the higher the negative value, the greater the impact on market sentiment, which will cause panic among investors. Unless the White House or the Federal Reserve comes out to soothe the market, the market may intensify expectations of a recession. In this case, the Federal Reserve is likely to directly enter the interest rate cut phase to remedy the situation.

PS: Currently, GDPNow gives a figure of -2.5%. This data is from last Thursday. A new version will be updated early Wednesday morning Beijing time. Even after excluding gold imports, the US first quarter GDP expectation is -0.4%.

All the above content is my personal opinion and may not be correct. It does not mean that if I consider it negative, the market will drop significantly. Everything depends on the market's reaction. Additionally, there is no need to question the final GDP data, whether high or low, is beyond our control. As long as the Federal Reserve and the White House believe in it, that’s enough.

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