Market Panic Amid Rising Unemployment Rate
Unemployment Rate: 4.3% (expected 4.1%)
Key Highlights:
- VIX (Volatility Index): Up 45% in just one day, currently at 27.
- Stock Market: $2.9 trillion wiped out, marking the worst day since the 2020 COVID crash.
- Rate Cut Predictions:
- JP Morgan: Expects two 50bps rate cuts in September and November.
- Goldman Sachs: Expects three 25bps rate cuts in September, November, and December.
Sahm Rule Triggered:
The Sahm Rule has predicted every recession since the 1970s accurately, with only two false positives that were eventually correct after a few months.
- Claudia Sahm: States, "We're not in a recession, but the odds of entering one in the next three months are high."
Historical Context:
- Typically, a recession follows the first interest rate cut, expected in September.
- A stock rally often precedes a rate pause, which has been observed recently.
Outlook:
While the Fed hopes to mitigate the impact by cutting rates starting in September, time will reveal if the markets are overreacting or if a recession is imminent later this year.
