Bad economic data is not good news for stocks while the Fed is already waiting

Economists are certainly seeing an economic slowdown and on Thursday, JP Morgan economists reduced their growth forecasts for the first quarter to 1.5%, in addition to a 1.4% drop for the fourth quarter. Many economists still believe that growth is just above 2%.

But one problem is that closing the government by 35 days not only could have been a temporary temporary brake on the economy, but has also slowed the publication of economic reports, creating an even darker look at economic activity.

"The data we've looked at recently is like everywhere, there's no really clear model," said Ward McCarthy, Chief Financial Economist at Jefferies. "Some things look really bad, from others or in the middle." The most reliable data was the number of durable goods, which continues to show the decline in ex-angels spending and, according to data from the past. investigation, because of the uncertainty over the trade war ".

While durable goods rose 1.2% in December, economists monitored basic capital equipment orders, which fell 0.7%, in addition to a 1% decline in November. This figure corresponds to equipment capital expenditures or to businesses, an area that would have been stimulated by tax reform.

The optimism sparked by trade negotiations with China has boosted stock market shares, but it is clear that the Fed considers the impact of trade on the economy as one of the risks of its decision to delay the rate hike. When the Fed began discussing a potential "pause" for rate hikes in December, the shares sold off and markets were gripped by the fear of a potential recession.

"The Fed is on the set … it basically said we would be patient with everything, if you get wrong data, they'll be patient with that," McCarthy said. "The Fed just wants to be in the backdrop, and I think that's a good place for it, not just because of the appearance of the data, but because of all the uncertainties that could be disruptive like trade and politics. " Consequently, they want to be removed from the role of goat scape ".

Part of the vagueness around the data is expected to disappear as the economy moves away from the closure, which began in late December but mostly covered the first weeks of January, in the first quarter.

If trade talks between the United States and China result in an agreement, economists expect the economy to reflect the end of uncertainty and this could resume. Nevertheless, JP Morgan's economists expect a growth of 2.25% in the second quarter.