Stocks are correcting, the yield curve is inverting, and US/China relations are deteriorating. If there was ever a time we could all use a bit of ‘serenity now’, well, it might be now.

In all seriousness, it has been a very bumpy month. Since the US/China trade discourse took a surprising turn for the worse in early May, equities have been under pressure and investors have sought safety in US government bonds, pushing yields lower and inverting the US 3-month/US 10-year yield curve, causing many to wonder if a recession is on the horizon.

Brinker Capital continues to believe the economy is biased higher, and we find support for that position in the Atlanta Fed’s GDPNow, a real time estimate of current quarter GDP growth. Constructed by the Atlanta branch of the US Federal Reserve since 2011, GDPNow uses a similar dataset and methodology to what is used to calculate reported GDP, but on a real time,  or “nowcast,” basis. Today, GDPNow is predicting Q2 GDP growth of 1.2%, see the below chart, and while that growth rate is shy of the 3.2% recorded in Q1, it would put us well away from a recession – commonly defined as two consecutive quarters of negative GDP growth.

Of course, GDPNow is subject to change – the model forecast is updated about seven times per month – and its predictive record is spotty. Its final quarterly estimate has historically come in a bit below or above the initial estimate of GDP growth from the Bureau of Economic Analysis. So, we should take an estimate of 1.2% growth with a grain of salt. But for now, GDPNow shows the economy slowing but still expanding, and that feels about right to us.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a registered investment advisor.

Chart source: Federal Reserve Bank of Atlanta

Tagged: Tim Holland, GDPNow, US/China trade, weekly wire