Today the second estimate for the 3Q2022 US GDP will be published. Consensus expects +2.7% after 2 consecutive quarters of negative growth. The Fed has insisted that the US economy is not in a #recession, and today’s datapoint may reinforce that message. It may also allow the fed to keep rising interest rates. If you look at the chart below, earnings for S&P500 companies are not behaving like in prior recessions, indicating we haven’t seen the necessary correction we typically see in those episodes. It seems consistent with the fed’s message. The question is, if they keep hiking, how long will it take until earnings fold? And if/when they do, what is the Fed going to do?
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