Two weeks ago, I wrote, “Right now, the backdrop remains positive for stocks unless really bad economic data starts to show up.”
The market was spooked by last week’s unemployment data, which was seen as higher than expected, driving a strong sell-off in stocks.
See below how unemployment moved to 4.3% vs. 4.1% expected.
The FED is expected to start cutting rates next September. However, if they start “too late,” the stock market typically does not react well. The question is whether we’ll go through a recession soon and, if so, how severe it will be.
It has been interesting to observe how expectations have shifted from being very pessimistic (recession coming) to optimistic (inflation might run too hot) and back again to recession fears.
The Q3 GDP Nowcast sits at 2.11%, which is not recessionary at this point.
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