We’re now starting to get some of the hard data that’s going to tell us two things - how consumers are reacting to tariff-induced higher prices and how businesses are handling the potential disruptions from the trade war.
The data wasn’t altogether unexpected.
Q1 GDP came in at -0.3% with most of the damage being done by a huge increase in imports from people looking to get ahead of tariffs. Does that mean we could see a snapback in Q2 as the trade deficit normalizes or even reverses again? It’s possible, but if the tariffs stick, consumers start to pull back on spending and businesses try to get leaner to balance out tariff risk, it could be another rough quarter.
The labor market data was a mixed bag. The ADP report showed another slowdown in hiring, while job cuts see a big increase from the pre-DOGE days. On the other hand, non-farm payrolls came in above expectations (although previous month’s numbers were revised downward). I think we could best describe the jobs market as “holding on but unsteady”. There are clear signs that hiring could be getting ready to freeze up.
The earnings report from McDonald’s was a bit of a stunner when it reported the largest same store sales decline since 2020. In an environment, such as this one, it’s understandable that some of the consumer discretionary names see weaker consumer demand. But when people stop going to McDonalds…
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