What a Positive GDP Report Means for Investors

Wall Street is expecting a positive GDP report on Thursday, which could impact the markets as investors grapple with disappointing earnings from Microsoft and Alphabet.

Both investors and the market are keeping a close eye on the third-quarter gross domestic product, especially since so many prominent pundits and institutions mull over recession probabilities. 

That includes CEOs such as JPMorgan’s Jamie Dimon and David Solomon of Goldman Sachs. Dimon warned of a possible U.S. recession next year in the company’s earnings call. Following earnings from Goldman Sachs, Solomon also warned that investors and consumers need to approach 2023 with caution.

And this brings us to the GDP reading this week, one that will help economists and analysts understand where the economy stands. The U.S. has had two negative GDP reports–with the first quarter shrinking by 1.4% and the second quarter shrinking by 0.9%. The technical definition of a recession is two consecutive negative reports. 

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However, some experts believe that this GDP could actually show growth. The magic number, according to Refinitiv, is a growth of 2.4% between July and September. 

Real Money’s Stephen Guilfoyle bemoaned the overall macro environment this week, though he noted that the GDP print has the opportunity to appease some people. 

Anyone else notice the macro this week? It’s been awful. On Monday, S&P Global put a disastrous Services Flash PMI and an also contractionary Manufacturing Flash PMI to the tape for October. On Tuesday, the FHFA HPI printed in the hole month over month, while the Case-Shiller HPI simply fell out of bed year over year, both for August.

What this does is box the FOMC in. Sure, we’ll see New Home Sales this morning and Durable Goods Orders on Thursday morning. Those are important. There will be a Q3 GDP print on Thursday morning that will make some folks happy. 

The initial GDP report will help investors assess the state of the market but may not be enough to shut down the recession talk across Wall Street–though, as Guilfoyle noted, it may be enough to give some investors a serotonin boost and distract from disappointing tech earnings.  

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