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The US stock market continues to show resilience, fueled by positive earnings and easing inflationary pressures. However, the challenges posed by inflation still appear to be far from over.
Stocks rallied for the second consecutive session on Wednesday, with markets reaching new records despite mixed signals in the economy.
The U.S. economy continues to display mixed signals, with both growth and challenges emerging across various sectors.
Rise in inflationary pressures, job market fluctuations, and recent shifts in consumer behaviour forces US Economy and Market to Slow Down
The general sentiment indicates that although the rate cut might encourage short-term business investments, many believe that lasting improvements will only occur following further easing of monetary policy.
The US economy displays a blend of resilience and challenges. Although inflation appears to be managed, there is cautious optimism for continued growth in the market.
The labor market remains a critical concern. While the national unemployment rate ticked down to 4.2% in August 2024, the IT sector is experiencing a disproportionately high unemployment rate of 6%, reflecting significant disruptions due to advancements in AI and streamlining efforts. This divergence highlights the uneven impact of technological change across different sectors.
On September 18, 2024, the Federal Reserve implemented a bold half-point rate cut, reducing the federal funds target range to 4.75% to 5%. This move was driven by a combination of cooling inflation and a softening labour market, signalling the Fed’s intent to prevent the economy from tipping into recession. The decision reflects a recalibration of monetary policy aimed at sustaining economic growth while managing inflation, which has shown signs of abating.
The US economy continues to face a mix of challenges and opportunities as it adapts to higher interest rates, inflationary pressures, and shifting consumer behaviour. In recent months, Wall Street has been alarmed by rising delinquencies in credit card and auto loans, particularly affecting lower-income consumers, signaling potential economic stress.
The U.S. economy in 2024 is at a pivotal point. While inflation is under control, economic growth is decelerating, shifting the spotlight to the Federal Reserve’s decisions on cutting interest rates. The conclusion of the inverted yield curve could signal the onset of a recession.
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