Most European and U.S. indexes rose this week. Many investors are wondering why the market is soaring as recession talk grows louder.
The most plausible explanation is good old "bad news is good news" rhetoric: the outlook for global growth has weakened to the point that even the tabloids are publicizing it.
However, two Fed members said yesterday they would support a 75 basis point hike at the next FOMC meeting, but dismissed fears of an economic downturn.
The S&P 500 rallied 1.5%, while the Nasdaq gained more than 2%. However, the 2-10 year portion of the U.S. yield curve remained inverted and volatility remains relatively high, meaning gains could reverse at any time.
Today, the latest labor market data will be released in the United States. For more than a year, inflation data has stolen the spotlight from labor market data and set Fed expectations. And with the number of job openings remaining above 11 million, there is reason to believe that people looking for a job will be able to get one. Therefore, labor market data will certainly not be critical to the Fed's decision-making process in the near term. However, as recession talk takes center stage, investors are increasingly focused on the employment numbers. The U.S. economy is expected to have added more than 250,000 jobs in June, a strong number for the pre-pandemic period, and the unemployment rate is seen stable at 3.6%.