The huge beat in US GDP growth

This is going to be real quick. The Q1 GDP numbers came out. And they were a huge beat, showing 3.2% annualized growth versus an expected 2.0%. Even the bullish Atlanta Fed nowcast undershot this at 2.7%.

If you look at how the quarter began and how it finished, especially regarding the most recent consumer spending numbers, this is a clear case of re-acceleration. So, for me, it reinforces my view that the period around the shutdown was an aberration and a mid-cycle pause rather than a portend of recession.

Will the Fed go back to its hawkish tilt? I say no. I think its made one pivot and it will stay with that. And as I wrote yesterday, you can look at the Fed’s about face as coincidental with the uptick in data because Fed policy acts with a lag. And that means present Fed policy will be supportive of future US growth.

3.2% is above trend and above what most people consider the potential for the US. So the question now will be: How long can the US sustain above trend growth? And, of course, what will this mean for asset prices?