If you look at all the data released on Thursday morning, you would easily come to the conclusion that the US economy is still in pretty good shape. Not too fast, said one market expert.
Raheel Siddiqui, senior investment strategist at Neuberger Berman, said he thinks investors have to dig deeper into the GDP report.
“I live in the world of data,” says Siddiqui. “The data today is terrible, but most won’t tell you that.”
Real disposable personal income, for example, fell more than 2% in the fourth quarter from a year ago. It’s an indication of how inflation is impacting consumer spending.
Siddiqui thinks inflation continues to be an issue for the economy… and the Fed will act as appropriate to tame it. He believes there is a greater chance of a sharper rate hike than the market is willing to admit. Traders are now expecting a small rate hike next week… a quarter point. But Siddiqui said half a point is not out of the question.
“The Fed is hoping that if they keep raising rates, that will have a negative effect on assets,” he said. Spending slows and stocks go down.”
“The Fed doesn’t win this game, so I wouldn’t be surprised if the Fed does a 50 basis point rate. [half-point] raise prices to make the market take them seriously,” he added. “If I [Fed Chair Jerome] Powell, that’s something I would consider.”
