Relax, it's just a mid-cycle expansion

The market adopted a risk-off tone when headline Q1 GDP came in lower than expected at 1.6%, compared to an expected 2.5%. More importantly, core PCE rose at an annualized rate of 3.4%, which was hotter than expectations and led to stagflation fears. Upon closer inspection, nominal GDP growth was dragged down by the combination of inventory adjustments and exports. Final sales, which is a better signal of economic growth, came in at 3.1%.
 

Greg Ip at the WSJ offered a constructive interpretation when he pointed out that the U.S. economy still accounts for 26.7% of global GDP, which is the highest level since 2006.

Investors should fade stagflation fears and embrace the “no landing” scenario. These conditions should be good news for risk assets. It’s what a mid-cycle expansion looks like.

The full post can be found here.