Could a deeper-than-expected GDP contraction (-0.5%) trigger a sell-off in the U.S. stock market?
The U.S. economy contracted more than expected in Q1, with final GDP revised to -0.5% (vs. -0.2% forecast). This sharp downgrade raises key concerns. Negative scenarios to watch: 🔻 Rising recession risk if Q2 GDP (to be released on July 25, 2025) also shows negative growth 💼 Potential for weaker corporate earnings, especially outside AI/tech sectors (Q2 earnings reports in July) ⚠️ Stagflation threat if inflation remains sticky (PCE report on June 28) while growth stalls 💣 Market is heavily concentrated in mega-cap tech, which may unwind quickly if sentiment shifts If upcoming data (PCE inflation, jobs report, Fed minutes) disappoints, the market could face a broad-based correction. Positive scenarios to watch: ✅ If inflation data (PCE) shows meaningful cooling, the Fed could pivot faster