Despite the recent market recovery, investors are still shaken by a historic global sell-off lasting three days, triggered by weak data in the United States and an unexpected rate hike in Japan.
On August 5th, a sudden wave of global financial and economic uncertainty hit, causing risk assets to plummet.
US stock indexes plummeted, with the Dow Jones down over 1,000 points and the Nasdaq Composite dropping over 3%.
The Japanese Nikkei 225 saw a 12.4% decrease, the biggest single-day drop since the 1987 Black Monday crash, while European markets also slumped.
The sell-off prompted some investors to implement recession strategies, moving towards defensive stocks, dividends, and government bonds, while selling off high-growth AI-related stocks.
The Federal Reserve, criticized for contributing to recession fears by delaying rate cuts, faced calls for an emergency rate cut before September.
The experts debate the Fed’s next move.
During the tumultuous start of the week, David Kelly of JPMorgan Asset Management suggested that the Fed should reassure markets that they are prepared to cut rates when necessary, avoiding hasty emergency cuts that could harm investors.
Kelly pointed out that the Fed’s prolonged high rates weakened the job market, contributing to the recent market panic.
Waiting too long to act allowed volatility to surge, and even immediate rate cuts have a delayed effect on the economy.
Market economist Claudia Sahm believes the Federal Reserve doesn’t require emergency rate cuts but suggests a 50 basis point cut to ease monetary policy.
Sahm highlighted the need for the Fed to abandon its restrictive policies.
While Sahm doesn’t predict a recession, she emphasizes the importance of stabilizing the labor market and economic growth to avoid further weakening and potential recessionary pressures.
In conclusion, all eyes are on the expected Fed rate cut in September, though uncertainties loom over the market’s stability.
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