Bad News Is Good News Again: Why Weak GDP Could Boost Markets

Good Morning Ladies and Gentlemen

“As a coach, you couldn’t ask for anything better. We are on the cusp of a historic moment.”

Murat Yakin

The most seemingly useless thoughts often turn out to be the most valuable. Daydreams, idle curiosities, and apparently trivial hobbies create mental space in which creativity can thrive. They liberate us from the constraints of immediate goals, allowing unexpected connections to form. Many breakthroughs, insights, and moments of joy begin as distractions, gentle reminders that not everything worthwhile needs to serve a practical purpose.

Back to Square One

The American president’s threats of ongoing attacks on Iran likely have a half-life as short as his previous threats during his second term. This sentiment appears to be the consensus among investors, as their reactions to recent attacks on Iran were muted given the president’s contentious image. The constant barrage of news has become rather exhausting. There seems to be a lack of coherent strategy, with a tendency towards erratic impulses. I find myself trying to minimise exposure to White House updates, as they tend to distract me from making sound, long-term decisions.

U.S. GDP Q2 2026

The official U.S. GDP figure for Q2 2026 has not yet been released. The U.S. Bureau of Economic Analysis (BEA) is set to publish its advance estimate for Q2 2026 GDP on July 30, 2026. As of July 8, 2026, the Atlanta Fed’s GDPNow model projected real GDP growth for Q2 2026 at an annualised rate of 1.3%. This indicates a significant slowdown in U.S. economic growth. Furthermore, consumer spending appears to have declined, along with net exports. What implications might this have for inflation numbers?

Inflation Projection

Well, Ladies and Gentlemen, if these figures are confirmed, they may signal that inflationary pressures are finally beginning to ease, or even that break-even inflation is collapsing. This would mean that, alongside the recent softening in U.S. labour market data, a downward trend in inflation reinforces the argument for the Federal Reserve to maintain its current stance for the time being. Policymakers are unlikely to feel an urgent need to adjust monetary conditions, either tightening or loosening, until a clearer economic picture emerges. Additionally, with the November election approaching, a rate hike could be politically contentious and might unsettle both voters and financial markets. Thus, for now, I believe, patience appears to be the Fed’s preferred course.

What About the Markets?

If U.S. inflation were indeed to decline in the months ahead, the outlook for risk assets could improve significantly. Lower inflation would ease pressure on the Federal Reserve, enhancing the chances of interest rate reductions or a more accommodating policy approach. Historically, this kind of environment has been beneficial for equities and other growth-oriented investments. Additionally, declining interest rates and a weaker U.S. dollar would create a favourable setting for precious metals.

Conclusion

If these trends, such as the one for the Euro-zone I wrote about last week, continue, investors may be entering a more favourable environment. Lower inflation, stable monetary policy, and the prospect of declining interest rates could provide meaningful support for both risk assets and precious metals. As discussed in a previous Stefan’s Weekly, I also expect lower energy prices due to El Niño, which could further ease inflationary pressures in the months ahead. While uncertainty remains a permanent feature of financial markets, the balance of risks appears to be shifting toward opportunity rather than restraint. Patience and discipline may soon be rewarded.

Finally

Please, Ladies and Gentlemen, keep your fingers crossed for the Swiss national team’s match against Argentina. Please let Murat Yakin, the Swiss national football team, the Swiss people and me dream a little longer.

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li. Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li