Dow and S&P 500 updates: Stocks react to GDP

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If you look at all the data that came out Thursday morning, it’s tempting to come to the conclusion that the US economy is still in pretty good shape. Not so fast, says one market expert.

Raheel Siddiqui, senior investment strategist at Neuberger Berman, said he thinks investors have to dig deeper in the GDP report.

“I live in the world of data,” Siddiqui said. “Today’s data was terrible, but most won’t tell you that.”

Real disposable personal income, for example, fell more than 2% in the fourth quarter from a year ago. That’s a sign of how inflation is impacting consumer spending.

Siddiqui thinks inflation continues to be a problem for the economy… and that the Fed is going to act accordingly to tame it. He believes there is a greater chance of more aggressive rate hikes than the market is willing to admit. Traders are currently expecting a small rate hike next week… a quarter point. But Siddiqui said a half point isn’t out of the question.

“The Fed is hoping that if they continue to raise rates, it will create a negative wealth effect. Spending slows and stocks come down,” he said.

“The Fed is not winning this game, so I would not be surprised if the Fed does a 50 basis point [half-point] hike to make the market take them seriously,” he added. “If I were [Fed Chair Jerome] Powell, it’s something I would consider.”