GDP and Jobs Show the Stock Market Bears Are Still Early

There’s a price to be paid for being early in investing even if you get the broader story right, as US stock market bears are learning the hard way.

While recession remains a very real threat, data released Thursday confirmed that it could take several quarters for the US economy to run out of momentum. Gross domestic product increased at a 2.9% annualized rate in the last quarter of 2022, Commerce Department data showed, while a separate report showed that already low initial jobless claims declined.

The latest reports come on top of evidence that households still have stockpiles of excess savings accumulated during the Covid-19 pandemic that could take months or longer to deplete. Meanwhile, the S&P 500 Index is up about 12% from its Oct. 12 low, and many investors have missed the bounce because they’ve been hunkering down ahead of the widely predicted recession.

To be sure, it’s hard to look at Thursday’s numbers and conclude that the bears are simply wrong. First, consider that the topline GDP number got a whopping 1.5 percentage point boost from the volatile inventory category, as my Bloomberg Economics colleague Eliza Winger underscored, while personal consumption growth — the true engine of the US economy — moderated and came in slightly below consensus expectations. Spending on services such as health care, housing and personal care helped offset slow growth in goods, but that support may not endure.