Here’s what a 2.9% growth in GDP means for the U.S. stocks

After the Bureau of Economic Analysis reported that the U.S. economy concluded the final quarter of 2022 in strong form, the S&P 500 is trading a little higher on Thursday.

GDP growth beats expectations

The fourth quarter’s gross domestic product rose at an annualised rate of 2.9%, according to the Commerce Department, which is somewhat faster than the 2.8% economists had predicted.

However, the growth rate was a little bit greater in the previous quarter, at 3.2%. But this morning, a tonne of other economic indicators were positive.

In contrast to expectations, new home sales increased to 616,000 in December. The number of unemployment claims decreased to a level last seen in April 2022, and Thursday’s report on the month’s supply of durable goods was similarly encouraging.

For the year, the benchmark index is now up 6.0% year-to-date.

U.S. stocks could go further up

A Deutsche Bank analyst now anticipates that the current rise in the stock market will considerably extend further in the upcoming weeks in light of the favourable economic data.

There won’t be a recession in the first quarter, according to Binky Chadha. As a result, he anticipates that the S&P 500 will reach the 4,500 mark during that time.

We view the rally as having further to go. While a number of leading indicators have fallen steeply, raising the alarm, there are several reasons for a continued pushing out of the timing of a potential recession.

These include healthy business balance sheets, insufficient layoffs, robust consumer demand, and extra savings brought on by the pandemic. He acknowledges that the market could fall by almost 20% from here if the recession starts, but he anticipates a full recovery to the 4,500 level by year’s end.

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