The Iran war and the TSA distraction are impeding U.S. growth. Fourth-quarter growth has been slashed to a 0.7% annual pace, and the Atlanta Fed has cut its first-quarter GDP estimate to a 2.3% annual pace. So, you might be wondering what happened to my prediction of 5% annual GDP growth this year? Well, it is clearly being postponed until the Strait of Hormuz is reopened and Congress stops impeding U.S. commerce by not paying TSA agents.
Interestingly, Fed Governor Christopher Waller’s comments on CNBC after the show how the anxiety about the inflationary effects of the Iran war have caused the Fed and other central banks to hit the pause button until they figure out the inflationary impact of the war, despite the fact that economic growth will naturally slow due to higher food and energy prices caused by the closure of the Strait of Hormuz.
As soon as the new Fed Chairman Kevin Warsh takes over in May, more key are expected to commence. The Fed likes to ignore food and energy inflation, which was substantial in the February inflation reports and is expected to soar in the March inflation reports, like the Consumer Price Index () and Producer Price Index (). Warsh is expected to argue that the productivity gains from AI are not inflationary and will boost U.S. GDP growth. It is imperative that Warsh take over and lead the FOMC, since too many Fed members are “deer in headlights” with no confidence in the econometric models.
The most explosive growth remains in technology stocks associated with the data center boom. Founder and CEO Jensen Huang said that he expects at least $1 trillion in demand for its Blackwell and Rubin AI systems through 2027, up from about $500 billion in projected demand through 2026. recently announced that its revenue surged 196.3% to $23.86 billion in its latest quarter compared to a year ago.
Interestingly, the data center related stock with the second strongest sales growth after Micron Technology is Super Micro Computer (SMCI) with an amazing 171% forecasted first quarter forecasted sales growth due to its massive order backlog. SMCI is now trading at less than 10 times 2026 forecasted earnings after it was announced that it had suspended three people charged with selling Nvidia GPUs to China via Taiwan. Since the company is cooperating with the Department of Justice, I do not expect Super Micro Computer to be charged.
Super Micro Computer accounts for approximately 9% of Nvidia’s GPU sales, so I am planning on sticking with the stock despite its recent setback. In fact, SMCI is now so cheap that I would not be surprised if it is not acquired in the upcoming months.
Despite the food and energy inflation caused by the Strait of Hormuz closure, I am expecting central banks to cut key interest rates in the upcoming months to stimulate their respective economies. The Fed should join the global rate cut parade in May when Kevin Warsh takes over as the new Fed Chairman.
As the Fed cuts and uncertainty dissipates, the 5% annual GDP growth that I have predicted should materialize as soon as possibly the second quarter. Improving weather should help to boost consumer confidence, especially after severe winter weather impeded first-quarter GDP growth. U.S. GDP growth is being boosted by massive productivity gains, strong export growth from gold, LNG, refined products, and crude oil, plus steady consumer spending. Housing remains a weak link that is impeding GDP growth, so it is imperative that the Fed cuts key .
