Retail sales for December 2024 were a bit disappointing with only +0.4% increase (expected +0.6%), but Retail Control (which goes straight into GDP calculations) was quite strong +0.7% (expected +0.4%). This was immediately reflected in the Atlanta GDP tracker, where consumer spending (real PCE) rose to 3.69% in Q2 (SAAR) from the previous forecast of 3.33% - see Figure 1. Meanwhile, the GDP forecast jumped to 2.96% - Figure 2.


The GDP forecast from its Q4-2024 peak on December 11 (+3.36%) fell to the bottom on January 3 (+2.45%), but quickly returned to higher levels on January 16 (+2.96%) - see Table 1. The largest change in contributions since December 11 is PCE (+29 bps) and a drop in inventories (-44 bps).

Can the PCE tracker predict a bear market for the S&P500? It failed to do so in the last two bear markets of 2020 and 2022 – see Figure 3. Only PCE Goods cyclical spending confirmed a slowdown in Q2 2022…

Can the GDPI, Residential, or Government tracker predict a bear market for the S&P500? See Figure 4. Only GDPI and Residential confirmed a slowdown in Q2 2022, and a decline in Residential alone is not enough to change the fate of the entire economy as in Q3 2024.

Can the GDP or Final Sales tracker predict a bear market for the S&P500? Probably not… see Figure 5. Similarly, the change in inventories and net exports – see Figure 6.


While the cyclical components of GDP can be helpful in assessing the cycle, the stock market will generally be “faster” in its reaction to an approaching recession. Only a holistic view (as the market does) allows to assess where we are in the cycle. But the stock market can also make mistakes... like in 2022, when the S&P500 fell over 25%... and there was no recession at all...

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