US Growth Slows In Q1, Yet Inflation Acceleration Signals Stagflation: 'The Worst Possible Outcome For The Fed'
Portfolio Pulse from Piero Cingari
The U.S. economy's growth slowed to 1.6% in Q1, below expectations and the previous quarter's 3.4%, signaling stagflation with rising inflation rates. The PCE price index rose to 3.4%, and the core PCE to 3.7%, exceeding forecasts. This scenario is seen as negative for markets, with the iShares 20+ Year Treasury Bond ETF (TLT) and the SPDR S&P 500 ETF Trust (SPY) both experiencing declines. Experts highlight the dual challenge of sluggish growth and high inflation, with potential negative impacts on bond and stock markets.
April 25, 2024 | 2:59 pm
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NEGATIVE IMPACT
The SPDR S&P 500 ETF Trust (SPY) fell 1.4% in response to the U.S. economy's slower growth and higher inflation in Q1, indicating stagflation.
SPY's decline is a direct consequence of the stagflationary environment indicated by Q1's economic data, which traditionally is unfavorable for equity markets due to the dual pressures of slowing growth and rising inflation.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90
NEGATIVE IMPACT
The iShares 20+ Year Treasury Bond ETF (TLT) fell 1%, reaching mid-November 2023 lows amid stagflation concerns and rising inflation.
The decline in TLT is directly linked to the reported economic conditions of stagflation, which typically leads to higher inflation and lower growth, negatively impacting long-term treasury bonds.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90