Bad economic news might actually be bad again
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On Friday morning, the August work report confirmed what the market expects after the slowing down business growth of July and the revisions of the previous months: Cal Ripken-Esque’s indisputability of the labor market ended.
The data revealed that the economy added 22,000 jobs in August, weaker than 75,000 economists and unemployment rate increased from 4.2% to 4.3%.
Revisions in previous data have shown that the labor market is weaker than previously thought. JUNE GROWING -13,000 work was revised to the negative region for work, while July has shown a growth under the trend compared to last year, slowing down the growth of three months.
It is definitely enough to show a trend.
Considering that the possibility of Fed cutting is already 90%, the weak job report had little positive impact on the market – a zag because we are used to seeing.
Since the increase in inflation and ratio increases, investors have been eager to cut the causes. And considering that inflation was constantly domesticated, investors hoped to cool some labor market to finally force the Fed to lower rates.
The logic behind the “Bad News Is Good News” comes from here. Business losses, stopped career and less people rentering businesses may not be great news for individuals and households.
However, a diminishing labor market means that central bankers will take steps to save the day, to revive the economy and make companies and people borrow money cheaper.
Apart from, investors already expected the Fed to reduce rates at the September meeting. The rescue of the Fed was already “priced”, so to speak. While weak business figures are now making a deduction in a ratio deduction-and increasing the possibility of interruptions in October and December, investors are also thinking about the risks of a decline.
And now, in case of job reports and other macroeconomic readings, bad news may once again look like bad news.
After that, the economy will step on a fine line with the exchange of a Goldilocks scenario that investors are good enough to survive, but bad enough to make interruptions to come.
The stock market is difficult to love ratio cuts. However, it is important why these cuts are needed. Wall Street’s earnings are basically related to earnings. And it is more difficult to achieve positive gains in the struggle of the economy.
