The Week Ahead – Spoiler Alerts!

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

What a weekend for cinematic fans. Avengers: Endgame was released and quickly shattered expectations, hauling in a record-breaking estimate of $350 million during its opening weekend. The Marvel Cinematic Universe spent eleven years to craft their story, beginning with Iron Man back in 2008. Then, on Sunday evening, the other battle that has been eight years in the making finally took place, Game of Thrones: The Long Night. Directors and cast for these cinematic masterpieces were very careful in not divulging any spoiler information before their respective releases and implored viewers to not provide spoilers. In fact, the Russo Brothers (directors of Avengers: Endgame) went as far as putting out an open letter on social media. 

Warning!! Spoiler Alert!! Both plots revolve around our heroes facing down their nemesis and finding a way to prevail! The classic Hollywood plot! The actual spoilers are the details, viewers were already expecting our heroes to prevail – we just didn’t know who would survive. 

Similarly, the investment markets have been facing a similar foe akin to Thanos and the Night King for a long ten years. The dreaded recession and bear market. Last week’s advance estimate release of first quarter GDP came in at an astounding 3.2%. Expectations had been for around 2%. Government shutdown, China hard landing, company earnings weakening, were all fears that were on investor’s minds over the last quarter and yet somehow the U.S. economy grinded out a surprising result. However, dissecting out the data shows that the 3.2% posted was actually rather weak, with growth primarily coming from inventories ($128 billion currently) and foreign trade, where a drop off in imports contributed significantly. Final sales to domestic purchasers data, the core components necessary for ongoing GDP health, points to a downshift in growth for the latter half of 2019. While the threat of recession hasn’t been erased (and never will), the underlying economic data points continue to point to a slower but growing economic environment.

In the week ahead investors will be monitoring the Fed as they are set to announce their rate decision mid-week. Currently the market is pricing in a 2.5% chance of a rate cut and 0% chance of a rate hike. Investors will want to see continued consistency around “Fed Speak” given the quick turnabout from last December’s guidance still fresh on their minds. Additionally, we’ll get an update on the employment front where it’s quite possible to see the unemployment rate decline below 3.8%. If you’d like to read further on our current views, please check out the latest market commentary from my colleague, Louis Abel.

Data deck for April 27-May 3: