The advanced US GDP report is out and it is a positive. YoY Real GDP growth rose to 3.1%.
It’s a major win for the Trump administration, which surpassed its 3% growth goal.
Consumer spending, which makes up two-thirds of the economy, was solid but still a slight disappointment as confidence was hurt last year by the stock market swoon.
Non-residential investment held up with a 6.2% gain and R&D spending surged, which could have positive impacts on productivity gains and wages.
It’s a Goldilocks report for the Federal Reserve: inflation near target, slower but solid growth. This reinforces the patient approach to interest rates.
Still, bond market bets that the Fed will be on hold all year are a bit less sure in the wake of the 4Q numbers. Yields on 10-year Treasuries rose in the wake of the report.
The Russell Growth index spread over the Russell Value index resumes its rise.
But the Russell 3000-1000 spread (size) actually has declined.