Fed fears U.S recession? Central Bank to slash rates by 2%, steepest drop outside of an economic downturn since the 1980s

Traders maybe underestimating the true strength of the US economy, with bond prices still hanging on anticipation that Fed Reserve will be slashing interest rates by nearly 2%. There are major chances that the labor market could show some resistance, while depicting a drop in the unemployment rate, as per the expected August payroll data.

Traders are currently playing with the probability of the employment market rising or falling, and depending on whichever factor that overcomes the other, the further moves may be planned ahead. US treasuries have, until now, provided a standard return, of nearly 6%, and cooling inflation could yield some better results at the bond market.

Will the bond rally turn into a dangerous chase?

The US bond rally is somehow being dependent on various factors, including trader anticipations around any impending recession. Moreover, the employment rate has risen steadily, with the payroll data has shown a critical depreciation of employment in the country over the past months, creating major chances of an impending recession. Therefore, simply depending on a bond rally would not be simply enough to understand the strength of the US economy.


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Economists cutting down recession fears

Even though the Fed is according to the market fears around an impending recession, economists at Goldman Sachs and other analyst firms are not in a mood to accept that recession will arrive so quickly and at such a steady pace. In fact, a report suggest that Goldman Sachs analysts have predicted that the chances of recession arriving next year is around 20%. Meanwhile, stocks like S&P 500 and other related IT-based stocks are acting according to the current market fears.

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FAQs:

Is recession being predicted by Goldman Sachs?
The US recession could be near or very far, but analysts at Goldman Sachs have predicted the possibility of the recession arriving in the country at just 20%

Are US traders banking on a bond rally?
There are major chances of a bond rally continuing yielding standard returns of nearly 6%, depending on the US Fed cutting interest rates.