The interest rate situation in the US: When "bad news is good news"
📉 GDP turns negative
Recently, the US GDP figures officially recorded negative growth, indicating that the economy is struggling after several quarters of slow growth. This is a clear warning sign of recession risk. However, in the financial market, this is received in a different way – "bad news is good news".
💡 Why is "bad news" actually "good news"?
In a prolonged high-interest-rate environment, investors are expecting the FED to ease monetary policy. Weak GDP is a signal that makes the market hopeful that the FED will soon cut interest rates to support the economy.
📊 Next focus: Unemployment rate
All eyes are currently on this week's jobs report. If the unemployment rate rises significantly – which is entirely possible in the context of weakened consumer spending and production – the FED will find it hard to ignore. A weakening labor market will force the central bank to take supportive action, such as cutting interest rates sooner than expected.
⚖️ Balancing growth and inflation
Nevertheless, the FED will still have to be cautious. Reducing interest rates too soon could bring inflation back. The FED is in a "dilemma", where every decision needs to be based on real data, especially macroeconomic indicators.
The current situation shows that the market is betting on an upcoming interest rate cut cycle. With negative GDP and the risk of rising unemployment, the FED will face significant pressure to pivot. In this context, once again, "bad news" becomes "good news" for investors.
The market will explode because all the bad things have passed and only good things remain for the market. Seizing the opportunity is something to do right now.