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U.S. Q1 GDP Contraction = Recession

  • According to gov't numbers released early Wednesday morning, GDP fell by 4.8% for Q1 - 2020.

  • Economists surveyed by Dow Jones expected a contraction of only 3.5%.

  • This marks the first reading of this magnitude since the 8.4% plunge in 2008.

  • Consumer spending, fixed investment, exports & inventories led to the decline.

Reasons to be concerned:

  • The Q1 GDP only included a few weeks of the economic shutdown. Q2 GDP numbers will likely show the real damage.

  • The rule of thumb economists use for a recession is 2 consecutive quarters of negative GDP growth. The notion that we are in an economic recession appears to be a foregone conclusion.

  • Markets continue to rally, mostly driven by algorithms, on speculation that biotech firms can find a quick vaccine for Covid-19. Don't trust it! An impulsive move in the market only begets another (as seen by this impulsive rally).

The FED has a meeting set for Wednesday afternoon @ 2PM ET - expect fireworks. They could offer some guidance on what they see going forward and any measures they may take to alleviate economic pressure.

#GDP #Recession #Covid19 #FederalReserve

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