This Morning's Log Entry

U.S. equity futures turned green this morning, after trading in the red overnight and early morning, on the better than expected GDP print. However, beyond the initial reaction, futures have vacillated around the flat line.

The headline number was aided by better than expected net exports; the market has a right to view that one ambiguously, as it may very well speak to the effect of tariffs on the U.S. consumer (i.e., higher than expected net exports could simply reflect a less-active U.S. consumer [fewer imports]).

A lack of consumer contribution is reflected in Econoday’s commentary on today’s report:

“A clearer look on underling domestic demand comes from final sales to domestic purchases, a reading that excludes both net exports and inventories and where the growth rate was only 1.4 percent. Lack of consumer punch is a bit of a puzzle at least based on the strength of the labor market.”

The contribution to GDP from inventory builds (which rose sharply) is always one worth dissecting as well; as rising inventories reflect positively in the number, however, they also speak to the potential for waning demand, which may be the case this time around considering the lack of consumer participation.

All in all, the number was fine and supports our view that recession is not on the near-term horizon.

The stock market, at this point, not screaming sustainably higher on good earnings and a decent, non-inflationary, economy speaks to present geopolitical risks…