Latest / Markets with Megan: A Quick Financial Markets Update / Negative GDP - First Signs of Recession? | S2 E036 | 04-30-25

Transcript

Negative GDP - First Signs of Recession? | S2 E036 | 04-30-25 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: The contraction is upon us.
• 0:01
  Megan Horneman: This is Markets with Megan.
• 0:03
  Megan Horneman: It is Wednesday, April the 30th.
• 0:05
  Megan Horneman: If you like this podcast, please subscribe, hit that alarm bell, share with friends, family or colleagues.
• 0:10
  Megan Horneman: But we're here today to break down what we saw this morning for the first quarter reading on GDP in the US and this is the advanced reading.
• 0:18
  Megan Horneman: We'll get a couple of revisions for this, but the first reading showed us that GDP contracted for the first time since 2022.
• 0:26
  Megan Horneman: Now this is alarming and it has set a lot of volatility in the markets today.
• 0:31
  Megan Horneman: But let's break down this reading and what we saw was that imports was the biggest culprit here.
• 0:37
  Megan Horneman: Imports took off about 5% of GDP.
• 0:42
  Megan Horneman: That's a huge contraction.
• 0:44
  Megan Horneman: We haven't seen that type of a jump in imports only a handful of times since 1940 that we've seen that type of a jump in imports.
• 0:52
  Megan Horneman: And this is primarily tariff related and we have talked about this that we're seeing some front running here in imports ahead of the tariffs, and when we import more than we export, that results in a negative number on GDP.
• 1:05
  Megan Horneman: We also saw personal consumption, which makes up about 70% of GDP.
• 1:10
  Megan Horneman: That was the slowest gain we've seen since the second quarter of 2023.
• 1:15
  Megan Horneman: Government consumption as well.
• 1:17
  Megan Horneman: So government spending that fell for the first time since June of 2022.
• 1:21
  Megan Horneman: So we're starting to get some of the effects of the Trump administration the tariffs, the Doge cuts.
• 1:28
  Megan Horneman: These are starting to show up in data and what we saw today was a negative reading on GDP.
• 1:34
  Megan Horneman: What does this mean going forward?
• 1:36
  Megan Horneman: Well, first of all, we have warned about this that we would see some short-term pain in economic data.
• 1:42
  Megan Horneman: It's starting to show up.
• 1:44
  Megan Horneman: But also, what does it mean for the Fed?
• 1:46
  Megan Horneman: We don't think the Fed's going to do anything in the meeting they have in May.
• 1:49
  Megan Horneman: It's too early.
• 1:51
  Megan Horneman: We did get some inflation data today as well.
• 1:53
  Megan Horneman: That shows that inflation is not completely behind us.
• 1:56
  Megan Horneman: But going forward, it's going to depend on what does inflation do?
• 2:00
  Megan Horneman: What does the labor market do Right now?
• 2:02
  Megan Horneman: The Fed's probably going to be on pause in May.
• 2:04
  Megan Horneman: We'll see what happens in the next coming weeks when it comes to their June meeting.
• 2:09
  Megan Horneman: The biggest report will be this coming Friday when we look at the payroll reports.
• 2:13
  Megan Horneman: That'll be for the month of March, but today we're just focusing on the fact that we did get that negative reading.
• 2:19
  Megan Horneman: There'll be some revisions to that, but the market's reacting in that way.
• 2:23
  Megan Horneman: The equity markets are lower today, bond yields are lower and that's because it's starting to price in the fact that we may be already within a short-shower recession.
• 2:33
  Megan Horneman: Thank you so much.
• 2:34
  Megan Horneman: If you want a further history of our podcast, you can go to marketswithmegan.
• 2:37
  Megan Horneman: fm.
• 2:38
  Megan Horneman: Thank you.