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While the stock markets in America have been volatile, it is worth noting that Wall Street has bounced quite significantly from the worst of the selling pressure. This raises the question of what the expectations are regarding interest rates.
In recent sessions, the S&P 500 index has regained stability after dropping to 5186.33 on August 5th, closing at 5455.21 on August 14th. Much of the focus among traders has been on the potential for a Federal Reserve rate cut during the
Many traders are looking at the recent lower Consumer Price Index (CPI) and Producer Price Index (PPI) figures as signs that the US economy might finally be cooling enough for the Fed to take action. Consumer Prices rose 2.9% year-over-year in July, down from 3% for the previous 12 months.
While 69% of traders in the market on August 7th bet on the most aggressive cuts, expectations for outsized rate moves are cooling a bit, silencing some of the euphoria that had previously been seen.
Maxim Manturov, head of investment research at
Although there are concerns about overvaluation, optimism, and overbought conditions, the market's gains since the beginning of the year have been concentrated in a few fast-growing tech stocks, making it vulnerable to significant drawdowns if the “bullish” outlook falters amid a weak news backdrop.”
While this is a complex question, there are a few things to consider when asking it. At this point, the real worry is that the US economy could be
A recession is a decline in economic activity that can last for a significant period. However, the statistics aren’t necessarily what drives recessions. People's perception of the economy can push it into a recession, whether warranted or not.
In this environment, it is common for traders to seek refuge in less volatile stocks. Many of these include consumer staples and healthcare—things that people need to purchase regardless of economic conditions. As traders start to look at the possibility of a slowdown in America, it's possible that companies that performed well in 2008 and 2020 could be of interest.
So, while some high-flyers in the tech sector may struggle, some more mainstream companies are likely to attract attention. When the Fed cuts rates, it will often be when the economy is sluggish. The aim is to encourage consumers and businesses to borrow and spend more. However, the