• Real GDP growth proved surprisingly slow in the first quarter, growing at a tepid 1.6% annualized rate vs. the consensus expected 2.5% pace.
    • The 1.6% reading marked the slowest growth rate in almost two years and underperformed the forecast from every economics group on Bloomberg, sparking a significant market pullback.
  • Positively, “Core” GDP, which excludes government purchases, inventories, and international trade – volatile categories from quarter to quarter, increased a healthy 3.1% in Q1.
  • The Personal Consumption Expenditures (PCE) Price Index rose 0.3% in March, as forecasters expected, but pushed the year-over-year (YoY) comparison to 2.7%, up from 2.5% in February.
    • Similarly, Core PCE prices, which exclude the volatile food and energy categories, increased by 0.3% as expected last month, but held steady at 2.8% on an annual basis.
    • A further subset dubbed “Super Core” PCE prices (services ex. food, energy, and housing) rose 0.4% in March and are up 3.5% YoY, accelerating from 3.4% last month.
  • Regardless of the measure, prices are rising too fast for the Federal Reserve (Fed) to ease monetary policy.
Inflation ReadingHeadline MoMHeadline YoYCore MoMCore YoY
CPI Mar. Data0.40%3.50%0.40%3.80%
PPI Mar. Data0.20%2.10%0.20%2.40%
PCE Mar. Data0.30%2.70%0.30%2.80%

How do GDP and Inflation data impact you?

  • With headline GDP slowing substantially more than expected and the Fed’s preferred inflation gauge remaining stubbornly above target, investors developed concerns that the economy may enter a period of stagflation.
    • Stagflation is a particularly worrisome economic situation marked by slow growth, high inflation, and high unemployment, which limits the effects of most monetary policy solutions.
  • However, given the strength of Core GDP, the mini-boom in the economy remains intact; stock prices will likely mirror earnings growth – the primary driver of stock market returns – for the remainder of the year.


  • This week is a significant one for economic data: the Federal Reserve will convene for its May meeting to discuss the path of monetary policy, and the April jobs report should give an indication of how the labor market is responding to slower growth and higher inflation.

How does economic data impact you?

  • These are all critical reports that should shed further light on the current growth/inflation picture but ultimately confirm our current understanding that interest rates will remain higher for longer than previously anticipated.
  • Although this situation gives the Fed little reason to cut rates, inflation isn’t roaring back and its downtrend appears intact, so there is little reason to raise rates from here either.


Market Index Returns as of 4/26/2024WTDQTDYTD1 YR3 YR5 YR
S&P 5002.68%-2.87%7.38%25.25%8.47%13.52%
Dow Jones Industrial Average0.67%-3.85%2.05%15.44%6.15%9.90%
Russell Mid-Cap2.29%-4.36%3.87%18.78%2.44%9.36%
Russell 2000 (Small Cap)2.80%-5.72%-0.84%16.09%-3.21%6.12%
MSCI EAFE (International)1.92%-2.85%2.77%9.54%2.46%6.19%
MSCI Emerging Markets3.77%-0.01%2.36%10.03%-6.15%1.82%
Bloomberg US Agg Bond-0.08%-2.43%-3.19%-0.82%-3.47%-0.14%
Bloomberg High Yield Corp0.60%-1.05%0.41%9.23%1.50%3.72%
Bloomberg Global Agg-0.31%-2.52%-4.56%-2.02%-6.02%-1.58%


  • Despite a concerning mid-week pullback across most major indices, stocks recovered nicely into the weekend.
    • The NASDAQ roared back to finish the week up 4.23%, beating all other benchmarks.
    • The S&P 500 added 2.68% while the Dow managed to eke out a positive 0.67%.
    • Small and Mid-cap stocks both improved more than 2% on the week, as well.
  • Emerging market equities posted a strong 3.77% return and outperformed developed international markets, which finished the week up 1.92%.
  • Domestic and global aggregate bond indices both declined for the week as yields across the treasury curve rose.
    • High yield corporates, which are less sensitive to interest rates, outperformed with a 0.60% return.


Wall Street Bosses Cheer Investment Banking Gains but Stay Cautious: Wall Street’s bosses are finally seeing signs of a broader pickup in investment banking, but they are not cheering too loudly just yet. Investment banking divisions showed robust growth in the first quarter for the largest U.S. banks, which reported surging revenues and fees. Capital markets led the comeback, executives said. “We have strong backlogs and momentum in every part of the firm,” Morgan Stanley’s new CEO Ted Pick told analysts on a conference call after his first quarter at the helm. “While the pipelines are healthy, there remains a backdrop of economic and geopolitical uncertainty.” Morgan Stanley’s investment banking revenues jumped 16% to $7 billion in its first quarter, it reported on Tuesday, sending shares up more than 3%. At Bank of America, fees from investment banking surged 35% to $1.6 billion, but its stock fell more than 4% as it set aside more money to cover souring loans. “We’re just happy to see the investment banking activity improve,” BofA’s finance chief Alastair Borthwick told journalists.

NFL Draft Highlights: Caleb Williams goes No. 1 to Bears; Offensive Picks Dominate First Round: The Chicago Bears selected Southern California quarterback Caleb Williams with the No. 1 pick in the NFL draft Thursday in Detroit. He was followed by the Washington Commanders’ selection of LSU quarterback Jayden Daniels and the New England Patriots’ choice of North Carolina quarterback Drake Maye. Six quarterbacks — Williams, Daniels, Maye, J.J. McCarthy, Michael Penix Jr. and Bo Nix — were taken in the first 12 picks. In total, 23 offensive players heard their names called, the most in NFL draft history. Williams, the consensus top prospect, threw for 3,633 yards, 30 touchdowns and five interceptions last season. He won the Heisman Trophy as the best player in college football the previous season after he took the Trojans from a four-win team to an 11-win team. Williams threw for 4,075 yards, 37 touchdowns and only four interceptions over 13 games in 2022.

Reprinted with permission from BTN. Copyright © 2021 Michael A. Higley.