Is Wall Street laughing in the face of recession? What will the week bring?
The market is starting the new week in a moderately optimistic mood. Investors are awaiting Wednesday's monetary policy decision. Fed, which will be the culminating market event in the coming days. Although the market is confident of a September cut – as evidenced by the charts of the main US stock indices – the key aspect remains the Fed's willingness to make further cuts in the face of deteriorating macroeconomic data.
What about the recession on Wall Street?
Recent data from the US economy doesn't look optimistic. Since April, the US labor market has added just 107 new jobs—fewer than almost every single NFP reading since December 2024. On the other hand, the US unemployment rate remains at a historic low—noticeably below the 35-year average. This has led to some speculation that this may be a signal of "full employment" in the US, and that the Fed should calibrate its policy to the clearly "anti-recessionary" premise of the job market.
A new surge in services inflation, essentially independent of Donald Trump's new tariffs, poses a risk to the economy. This points to existing pressures that could be exacerbated by tariff costs being passed on to consumers. If further price increases are followed by a shock in the form of widespread job cuts, consumers would go on the defensive. This would lead to an economic slowdown amidst elevated inflation.
Despite the many nuances surrounding the current state of the labor market, investors are placing a much greater emphasis on risk, pricing in increasingly dovish Fed policies, even until the end of Jerome Powell's term. A key question ahead of Wednesday's Fed meeting remains whether the Fed will further emphasize the risk of a weak labor market or moderate its communication in light of continued inflation growth.
- Weak data from the US – an anomaly or a prelude to recession?
- Will the US fall into stagflation?
- Fed cuts rates, but what next?
About the host
Dr Przemysław Kwiecień - Chief economist X-Trade Brokers. Doctor of Economics at the University of Warsaw, graduate of the University of Warsaw and London Metropolitan University (MSc). Holder of the prestigious CFA certificate. He has been working for XTB since 2007, previously he gained experience as an advisor to the Minister of Finance, Mirosław Gronicki, and an economist at Bank Millennium. At XTB, he manages the Analysis Department.
CFDs are complex instruments and involve a high risk of a quick loss of cash due to leverage. 69-80% of retail investor accounts lose money when trading CFDs with this CFD provider. Consider whether you understand how CFDs work and whether you can afford the high risk of losing your money.