June 25 (Reuters) – The GDP release is a salient reminder
that right now, the big risk for most investors is that the
consensus is too complacent.
How else to interpret a world in which U.S. growth falls at
an unexpectedly steep 2.9 percent annual clip in the first
quarter and yet stocks rally?
One easy conclusion is that everyone is leaning more or less
the same way, making the risk, if not likelihood, of an upset
all the greater. Low-probability events can have outsized
That fall in GDP, the sharpest in five years, was driven by
a decline in inventory buildup and health care spending, but
cemented by weakness virtually across the board. Final sales, a
measure which excludes inventories, actually fell by 1.3
Now, the narrative which argues that the first quarter was
just a weather-induced blip in a slow recovery has merit, and is
more likely than not.