There was plenty of bumpiness in the Q1 GDP report. But the slight revision higher, combined with yesterday’s enthusiasm regarding tariff policy, helped US markets rally. If investors believe that tariff risks will continue to erode, they may be lured back into “risk-on” assets like stocks and Bitcoin as their confidence increases, writes Bret Kenwell, US investment analyst at eToro.
The GDP data was revised slightly higher, showing a 0.2% contraction in Q1 versus a decline of 0.3% in the initial reading. While the headline looks positive, it wasn’t an across-the-board improvement when we look beneath the economic hood.
Source: Tradingeconomics.com
Consumer spending, which accounts for roughly two-thirds of GDP, grew less than expected, up 1.2% vs. an initial reading of 1.8%. However, government spending didn’t decline as much as previously thought. Business investment — and a jump in inventories as companies attempted to get ahead of tariffs — helped offset some of this weakness.
In all, the biggest concern would be a slowdown in consumer spending. But as we have seen in other data, and as we have heard throughout the Q1 earnings calls, the consumer remains fairly resilient. Investors will need that to remain the case going forward if the US economy is to avoid a recession (and for markets to continue higher).
