Economic and earnings data are in boom territory, with more momentum likely near-term. But the stock market tends to sniff out inflection points in economic data; so Lizz Ann Sonders, Senior Vice President and Chief Investment Strategist at Charles Schwab, is to keep a close eye on growth rates, and the possibility of a peak in this year’s second quarter.
See – S&P 500 Index: Three reasons to expect small gains over the next few years – CE
Stocks are generally more tuned into economic data’s trend and rate of change vs. level
“The market tends to discount a surge in economic activity; with waning performance after growth rates peak. Although I don’t fear peak growth in level terms; there is a strong case that peak growth rates will occur in this year’s second quarter – clearly courtesy of ‘base effects’ related to last year’s epic plunge across nearly all economic and earnings metrics.”
“The Federal Reserve – and its chair Jerome Powell specifically – are doing everything they can to run both the economy (and inflation) ‘hot’ for a while. Regarding inflation, as it heats up, expect Powell, et. al., to continuously reiterate the view that it’s ‘transitory;’ with too much labor market slack near-term to ignite the kind of systemic, wage-price spiral style of inflation of the 1970s. But markets aren’t outlawed from volatility associated with concerns that the Fed may get behind the curve.”
“Optimism is extremely elevated – certainly justified by stock market behavior over the past year, as well as recent economic releases. But some curbing of enthusiasm may be warranted given the history of the stock market as an uncanny ‘sniffer-outer’ of economic inflection points. This is not a time for FOMO-driven investment decision making; but instead of adherence to the tried-and-true disciplines of diversification (across and within asset classes), periodic rebalancing and fundamentals-based stock-picking (for those investors who do that directly).”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds gains above 1.0700, as key US data loom
EUR/USD holds gains above 1.0700 in the European session on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data.
GBP/USD extends recovery above 1.2500, awaits US GDP data
GBP/USD is catching a fresh bid wave, rising above 1.2500 in European trading on Thursday. The US Dollar resumes its corrective downside, as traders resort to repositioning ahead of the high-impact US advance GDP data for the first quarter.
Gold price edges higher amid weaker USD and softer risk tone, focus remains on US GDP
Gold price (XAU/USD) attracts some dip-buying in the vicinity of the $2,300 mark on Thursday and for now, seems to have snapped a three-day losing streak, though the upside potential seems limited.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
US Q1 GDP Preview: Economic growth set to remain firm in, albeit easing from Q4
The United States Gross Domestic Product (GDP) is seen expanding at an annualized rate of 2.5% in Q1. The current resilience of the US economy bolsters the case for a soft landing.