GDP Buoys U.S. Economy Despite Fed's Likely Rate Hike, 10-Year Yield Taps 5%

• The 10-year Treasury yield hitting 5% and $100 oil prices are significant market watch points, with current conditions differing from past instances due to an uptrend in oil.
• Despite high rates and sticky inflation, the U.S. economy's strength (6.5% nominal GDP) and resilient labor market provide a buffer against a severe growth slowdown.
• A potential slowdown in AI CapEx and high tech earnings estimates (up 86% year-over-year for the sector) pose risks for equities, especially if consumer spending or the labor market deteriorates.
• The Fed's language regarding the *pace* of tightening at the upcoming FOMC meeting will be a crucial differentiator for how the market ultimately responds.

Kevin Gordon discusses the significance of the 10-year Treasury yield hitting 5% and $100 oil prices, contrasting current conditions with October 2023. He notes that while these levels could pinch consumers and disrupt equities, the strong nominal GDP and resilient labor market might prevent a deep recession, though a slowdown in AI CapEx and high tech earnings expectations pose risks. The Fed's pace of tightening will be key.