by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with a deep dive into the latest GDP report and its implications for the growth outlook. We then briefly cover President Trump’s new initiative to expand IRA access for low‑income workers, efforts to crack down on international IP theft, the growing reluctance of farmers to respond to government surveys, and other market‑relevant developments. As always, we include an overview of recent domestic and international economic data.

 GDP Deep Dive: The economy continues to demonstrate resilience, reinforcing market confidence that it has the ability to absorb potential shocks. Business investment was supported by sustained AI-related spending, while household consumption benefited from tax refunds and improved credit availability. The government’s reopening also contributed to economic growth, with net exports being the only notable drag. Despite this steady expansion, the risk of a prolonged conflict involving Iran remains a key uncertainty for the outlook.

• GDP grew at a 2.0% annualized rate, accelerating from 0.5% in the prior quarter but coming in modestly below the 2.2% consensus forecast. The expansion was led by investment spending, which increased at a 2.5% annualized pace. Within that, technology investment remained the standout, continuing to outpace other categories as firms accelerate buildouts of AI-related infrastructure and capacity.
• At the same time, household spending showed signs of moderation, slowing from a 1.9% increase in Q4 2025 to 1.6% in the latest period. Growth was driven primarily by rising healthcare expenditures, which continue to underpin demand. In contrast, goods spending declined modestly, reflecting a pullback in nondurable purchases, a possible sign that consumers are becoming more price sensitive.
• The final two components, net exports and government spending, were subject to temporary distortions. The normalization of trade flows weighed on growth as a rise in imports led to lower net exports. Meanwhile, the government’s reopening drove a surge in public spending. Looking ahead, net exports are likely to remain a drag on growth, while the boost from government spending should help moderate declines.
• While growth has been relatively solid, its composition is likely to shape future performance, particularly for consumption and investment. Household spending is still expanding, but declining savings rates are eroding consumers’ capacity to absorb ongoing inflation pressures. Additionally, technology firms that depend on components from Asian markets, especially semiconductors, may be forced to delay projects until supply conditions stabilize, posing an additional headwind to investment.
• While we remain confident that the economy can continue to grow through the end of the year, we do see signs of moderation. We continue to believe that as long as households have access to credit, consumer spending will hold up, and investment spending should further support economic activity. That said, significant uncertainty still lingers. Therefore, we recommend maintaining at least some exposure to value stocks, which can offer a degree of protection against unexpected economic shocks.

TrumpIRA: The White House has announced a new website that will allow workers to find and compare private sector retirement savings accounts. The online portal will be developed through an executive order and aims to help low-income workers access the Saver’s Match program, which is set to take effect next year under legislation passed by the previous administration. The move signals that more people will have access to passive investments, which could provide greater stability in equity markets.

 International IP Theft: The US is expected to launch an investigation into Vietnam’s trade practices following a review of intellectual property protection and enforcement. The report accuses Vietnam of failing to protect US trade secrets. Vietnam is the first new country in 13 years to receive a priority designation, joining a list that already included India, China, Indonesia, Russia, Chile, and Venezuela. This suggests that tariffs, a tool to enforce better trade practices, will remain in place despite the court setback earlier this year.

Farmers Push Back: More farmers are refusing to answer USDA survey questions due to growing distrust. Crop producers have complained that the data being collected is often used against them, as reports of higher harvests generally lead to a decline in prices. Their refusal to cooperate with the USDA appears to be a sign of rising strain, but it could also compromise data quality. The lack of transparency regarding crop production could lead to greater price volatility, which may translate into structurally higher food inflation.

 War Powers Act: The White House is moving closer to a deadline regarding the conflict involving Iran that began on March 2. Under the War Powers Act, the White House must seek congressional approval to continue military action. While the exact timing has been debated, continuing the conflict would represent an example of a concentration of power in the executive branch. Although several resolutions have been introduced to end the conflict, they have been defeated in Congress as lawmakers remain unsure how to deal with the growing threat from Iran.

 Oil Companies Rally: Exxon and Chevron both reported strong first‑quarter earnings, which were aided by conflict‑driven tensions in the Middle East that pushed energy prices higher. Exxon absorbed some region‑related production outages but largely offset them through increased sales elsewhere. Chevron, which is less exposed to Middle Eastern supply risks, also posted higher sales as tighter global supply conditions boosted margins. Together, these results underscore why major energy producers remain attractive investment opportunities in the current environment.

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