GDP Was Dragged Down by Import Surge; Trump's First 100 Days Rock Solid; Economy Nowhere Near Recession

Wednesday's 1Q GDP first estimate should have changed many market participants' minds concerning their overall outlook and investing strategy, but not in the way one might think. The -0.3% print should have been viewed in a positive manner as opposed to the knee-jerk negative, "recession ahead" attitude.

The reason the -0.3% initial estimate should be a positive for the market is because the major component of the downside was the subtraction of imports, as companies beefed up inventory ahead of President Trump's expected tariffs. The surge of imports amounted to -5% in the calculation of GDP. All else being equal, the first quarter of 2025 was not bad at all if one excludes or excuses the rush of imports as possibly a one-time event.

For those believing the opposite, that the contraction in the first quarter is a sign that recession is close at hand and that the U.S. economy is overdue for one, that may be a faulty conclusion. Truth be told, the U.S. did have a recession recently, specifically in the first and second quarters of 2022, when GDP registered -1.0 and +0.3%. The Biden folks, keen on painting a picture of a healthy U.S. economy as midterms approached, goosed government spending in the 2nd quarter especially and re-defined what constituted a recession, which, prior to their "refinement" of the term, was two quarters of contraction. Given that the first quarter did contract and the second quarter would have contracted if not for fast action on the part of the corrupt to the core Biden administration, it can safely be assumed that the U.S. economy had a recession just three years ago, and thus is not overdue or close to another one.

Beyond the rhetoric out of the mainstream media that it appears not many on Wall Street are buying into, Wednesday's numbers - including the paltry 62,000 jobs created in April according to the ADP survey - fostered some positive emotions. Stocks erased early losses and ended up in positive territory, except for the NASDAQ, which just missed. The Dow shrugged off a nearly 800-point loss to finish ahead by 141. The S&P, down 225 points just before 10:00 am ET, ended up 8 points. The NASDAQ was down 465 points but finished with a minor loss of 14.98 points.

The small number of jobs created, per ADP, was quite frankly due to Trump's tariffs and the uncertainty surrounding trade and commerce. Many businesses put hiring on hold during the quarter, which would help explain the anemic numbers for April. When one considers the number of job openings that will become available once the deportations of people other than criminals commences, the U.S. employment picture looks fairly rosy.

With the GDP now in the rear view mirror, the focus will be back on earnings and Friday's Non-farm payroll data. The NFP isn't likely to cause much turmoil whether it's good or bad because of the tariff uncertainty. Wall Street pros can deal with that just fine. Earnings continue to roll in and late Wednesday and early Thursday some substantial companies reported.

Briefly:

• Prudential (PRU): small beat on EPS, stock trading flat pre-market
  
• Microsoft (MSFT): EPS of $3.46, topped estimates, +8% pre-market
  
• Meta Platforms (META): huge EPS beat ($6.43), +6% pre-market
  
• CVS Health (CVS): huge EPS beat ($2.25), +8% pre-market
  
• Mastercard (MA): small EPS beat ($3.73), +1% pre-market
  
• McDonalds (MCD): EPS and Revenue miss, same-store sales down, -4% pre-market

Other than McDonald's selling less of what they try to pass off as food, the earnings are looking quite strong, especially in the two Magnificent 7 stocks, Microsoft and Meta. Will this trigger another round of tech buys? Sure looks like it. Will the gains continue, and put the losses from the first quarter and April behind? Probably.

Wall Street, as is well-known, likes its toast buttered on both sides. They can put positive spin on the worst economic news, lipstick up the fattest pigs, so, with what appears to be mostly good news, it should be clear sailing to chug ahead toward the November and January highs. It's hardly nothing to ask for from the titans of tech and the money moguls. They've made plenty on the way down and will be happy to make more - and share the wealth - on the way back up.

The May issue of idleguy.com has a money page feature with tips and strategies for investing in turbulent times such as these that is worth a look.

Onward and upward. Trump's first 100 days have been impressive and he's just getting started.

At the Close, Wednesday, April 30, 2025:
Dow: 40,669.36, +141.74 (+0.35%)
NASDAQ: 17,446.34, -14.98 (-0.09%)
S&P 500: 5,569.06, +8.23 (+0.15%)
NYSE Composite: 19,114.23, +25.02 (+0.13%)