The U.S. Economy Thrives as Markets Brace for Fed Rate Cut: Analysis
The U.S. economy is flourishing, and markets anticipate a quarter-point rate cut from the Federal Reserve next month to kickstart the easing cycle amid resuming disinflation.
A slew of macroeconomic updates on Thursday revealed strong consumer sentiment, with WalMart raising forecasts and jobless claims decreasing.
While there are lingering weaknesses in manufacturing and housing sectors, the return to target inflation levels gives the Fed room to begin easing in September, supporting the ongoing expansion.
Despite robust retail spending, the Atlanta Fed’s ‘GDPNow’ estimate for the current quarter dipped to 2.4% growth. U.S. and global economic surprise indexes remain negative overall.
The updates have dispelled recession fears while maintaining hopes for Fed easing.
The consensus now leans towards a quarter-point cut rather than a half-point, with futures pricing in just 30 basis points of cuts for next month and 61bps for the remainder of the year.
Anticipation builds for the Fed’s annual Jackson Hole symposium and Nvidia’s earnings report on Aug 28, shedding light on artificial intelligence trends.
Most Fed officials are prepared for easing next month to prevent further disinflation and high real inflation-adjusted policy rates.
Wall Street, having recovered from recent volatility, responded positively to Thursday’s rally, with futures pointing to a strong end-of-week performance.
While Fed expectations reset, Treasuries held steady, and the dollar strengthened alongside stocks.
Global markets mirrored Wall Street’s optimism, with Asian and European markets rallying, buoyed by positive economic data and central bank support.
Overall, the market sentiment is positive, with signs of sustainable growth ahead.
Key events to watch for on Friday include U.S. housing starts data and corporate earnings reports.
Stay tuned for further developments that could shape U.S. market direction.