Faced with the sudden signs of recession in the US economy, the market does not seem to give any room for buffering, and directly throws the challenge to Federal Reserve Chairman Powell.
The latest unemployment rate data not only triggered the Sam rule that warns of the risk of economic recession, but also formed a double blow with the July non-farm employment growth data that was far below market expectations, which undoubtedly cast a heavy shadow on the prospects of the US economy. This series of negative news directly ignited the panic in the US stock market, and the confidence was hit hard by the sharp drop at the opening.
In the field of cryptocurrency, you may feel puzzled: Why did the crypto market fail to usher in the expected rebound in an environment where the unemployment rate rose and the non-farm data was weak, which theoretically should promote interest rate cuts and benefit risky assets? There is actually a complex macroeconomic logic behind this. From a macro perspective, interest rate cuts can often stimulate the vitality of venture capital and drive the market up. But the key is that the premise of this effect is that interest rate cuts appear as a preventive measure before the economic recession.
For example, after the capital storm caused by the U.S. stock market circuit breaker in 2020, the Federal Reserve decisively cut interest rates by 100 basis points. That was a typical crisis response and passive interest rate cut aimed at stabilizing the shaky market. Although the external environment is far less severe than it was back then, and the warning of the Sam rule is not absolute, whether the U.S. economy can achieve a soft landing still depends on the direction of a series of subsequent data and the government's regulatory wisdom. As long as the unemployment rate does not rise sharply, the U.S. economy still has the possibility of a smooth transition, which is exactly what the U.S. government is striving to achieve.
After the data was released, the market quickly adjusted its expectations for the Fed's interest rate cuts, and the annual interest rate cut bets soared to 111 basis points. Among them, the possibility of a 50 basis point interest rate cut in September jumped from negligible to more than 90%, and expectations of multiple interest rate cuts this year also heated up again. In this storm, every investor is praying silently, expecting that the timely introduction of the interest rate cut policy can become the market's stabilizer and dispel the panic fog in front of them.
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