Tuesday's commentary got us ready for a wide range of outcomes following the Q1 GDP report, notes Steve Reitmeister of Reitmeister Total Return.
Right now, it looks like the third option is what happened. Let me repeat that section here: "The one wrinkle to the bear case is that any weakness found in the economy could actually be a positive for stocks.
Say what?
That's because bad news for the economy is good news for changing the Feds tune on raising rates...which investors could actually applaud with a rally."
So yes, the -1.4% reading for GDP is shockingly bad on the surface. But in some ways, it's so bad it's comical...as in not believable.
In my quick reading of the internals of the report, there are many one-time events that were oddities in the quarter (like lower than usual exports while imports surged...or lower government spending) that cause a temporary drop...but not a worrisome concern for what happens next. The best quote I have seen from another market expert is that this report is "noise, not signal".
That means this is not really a recessionary signal. This helps explain why the S&P 500 (SPX) is up nearly 1% as I write this commentary. Even rates are up. Because if this was truly about increasing the odds of recession and bear market, then the exact opposite would be happening in both cases. In fact, if people thought this -1.4% had any merit, the S&P would be testing 4,000 at this very moment.
Long story short, we are going to do nothing today with our continued vigilant watch for forthcoming information that gets us more bullish or bearish.
As for our overall portfolio today we are up almost 2%. Certainly, the overall market lift helps. Secondly, we owe big props to Avnet (AVT) for a monster beat and raise, leading to a +11% session. I doubt we will see a better report this earnings season.
