JP Morgan’s Jamie Dimon stated the other day that central banks got financial forecasting “100% dead wrong” about 18 months ago. Most, including the Federal Reserve, thought the economy would be near or in a recession by this time given the most aggressive monetary policy in history.
Today preliminary estimates of third quarter GDP are released. While the range of estimates is wide, all are suggesting growth has greatly exceeded any forecast.
Bloomberg Economics projects the 3Q GDP print to show “gangbusters 4.9% growth,” higher than the consensus estimate of 4.5%. The Atlanta’s Fed’s Nowcast estimates 5.4%.
Bloomberg opines the difference between the estimates is “extremely wide” but regardless growth will be amongst the top five quarters of growth for the millennium.
It is also widely forecasted that growth will slow considerably in the proceeding quarters. How accurate is this outlook? As noted, the central banks got financial forecasting “100% dead wrong” about 18 months ago.
An argument can be made that the forecasts have been 100% wrong since 2020 when the Federal Reserve stated it would permit both growth and inflation to rise above the accepted 2% speed limit and monetary policy would be remain essentially unchanged until 2024.
Longer dated Treasuries have surged in yield since late August. Ten-year Treasury yields are up more than 75 bps since the end of August. The thirty-year benchmark has increased more than 84 bps. An argument can be made volatility may surge if the data differs considerably from the consensus view. However as indicated above, what is the consensus view?
Speaking of volatility, two of three mega cap technology companies that have reported earnings have disappointed. The selloff in those issues was quick and sharp.
Yesterday the NASDAQ declined over 2.5% for a myriad of factors, the greatest decline in 2023. First was the a fore mentioned earnings disappointment of mega tech GOOG which declined almost 10%.
Longer dated Treasury yields continued to rise on anticipation of a larger than expected Treasury auction that is scheduled in November.
And then there is oil, which reversed a 2% early day decline to a 2% gain as it is now believed an invasion of Gaza is eminent, fearing a wider escalation of the war which may perhaps involve US troops.
After yesterday’s close META posted results that generally exceeded expectations however shares are lower premarket around 4% on an “uncertain economic environment.
Last night the foreign markets were down. London was down 0.57%, Paris down 0.64% and Frankfurt down 1.36%. China was up 0.48%, Japan down 2.14% and Hang Seng down 0.24%.
Dow and NASDAQ futures are down 0.25% and 0.95%, respectively but this could change significantly based upon the various interpretations of the 8:30 data. The 10-year is off 4/32 to yield 4.97%.
