US GDP shrank -0.3% in Q1, completely frustrating growth projections.
It's the first drop since 2022 — and a direct sign that the economy has begun to contract.
The probability of a recession has already jumped to 74%.
🤯 The Fed now faces its worst nightmare: negative GDP with inflation reaccelerating.
📉 The market didn't wait: it fell sharply right after the announcement
Dow Jones: -1%
S&P 500: -1 ,5%
Nasdaq: -2.1%
Russell 2000: -1 ,9%
Even without an explosion in the VIX, the message was clear:
the market is repricing the risk of stagflation.
Trump dropped the bomb on Biden's lap — and warned that tariffs are coming
“That’s Biden’s market, not mine,” Trump said.
He added that “tariffs will soon start to hit.”
He then promised: “when we take the Biden overhang off, the boom will come.”
In other words: more protectionism and more uncertainty ahead.
What triggered all this? The data:
⸻
- GDP: drop of -0.3% in the 1st quarter
The consensus expected growth of +0.3%.
And the worst part: 4 months ago, it was projected to be more than +3%.
It is the first negative reading since 2022 and highlights the end of the “soft landing”.
- Inflation reaccelerating: +3.7% in core PCE
The GDP Price Index rose by +3.7%.
Core PCE also: +3.7%.
Both well above expectations (3.1 %) and at the highest level since July 2024.
In other words: the Fed cannot cut interest rates — but it also cannot remain firm with the economy slowing.
- Long-term interest rates jumped: the market understood the risk
Even with negative GDP, 10-year Treasuries rose almost 10bps, reaching 4.20%.
The message was clear : o the market fears stagflation.
This is not a common cycle downturn. It is a break in the narrative of stability.
- The job market has started to crack
ADP reported just 62,000 job creation in April — the lowest number since July 2024.
Even before the GDP, the market was already reacting badly to this number.
The slowdown is coming from many sides.
- Oil Melting: Below $60
Even with the stock market rally in recent weeks, oil ignored it and fell sharply.
WTI was already pricing in demand weakness — and now it’s confirmed:
the world is slowing down.
- And Kalshi threw the shovel of lime: 74% chance of recession
The platform priced the highest level on record since 2020.
Bets rose 29 points after the data — a jump that shows the narrative changing in real time.
The market is no longer debating “if”… but “when”.
Summary : o Fed is cornered
Inflation rising. GDP falling. Employment slowing. Oil sinking.
And all this together with aggressive rhetoric and growing commercial risk.