Jeff Sica of Circle Squared Alternative Investments weighed in on the market sell-off, arguing that the problem lies in the credit markets.
Chicago Fed President Austen Goolsbee said Monday that central bank policymakers will respond to the weakness in the economy. U.S. Economy Fears of a recession resurfaced, leading to widespread selling across the market.
Goolsby also suggested current interest rates may be too tight, but declined to say whether policymakers would consider an emergency rate cut.
“The Fed’s job is very simple: Maximum employment, stable prices, and financial stability. That’s what we’re going to do,” he said in an interview with CNBC. “So if the overall picture starts to trend this way and any of those pieces get worse, we’re going to correct that.”
Wall Street’s fear gauge surges to highest level since 2020 as global turmoil deepens
Chicago Fed President Austin Goolsbee also suggested that current interest rates may be too strict. (Reuters/Brendan McDiarmid/Reuters Photo)
Goolsby’s comments came amid worsening turmoil in global markets.
The Dow Jones Industrial Average fell more than 1,000 points early Monday, while the tech-heavy Nasdaq Composite Index slid 3.9%. The S&P 500 slid a further 3%. The indexes have since recouped some of their losses.
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| Me: DJI | Dow Jones Average | 38830.91 | -906.35 |
-2.28% |
| SP500 | S&P 500 | 5208 | -138.56 |
-2.59% |
| I:Comp | Nasdaq Composite Index | 16269.551709 | -506.61 |
-3.02% |
Market turmoil began last week following weaker-than-expected July jobs data, which showed employers added just 114,000 jobs last month and the unemployment rate unexpectedly rose to 4.3 percent.
The rise in unemployment triggered the so-called thumb rule, a gauge used to signal early signs of economic downturns, which states that a recession is likely when the three-month moving average of the unemployment rate is at least 0.5 percentage points higher than its 12-month low.
Stock selling continues amid growing fears of US recession
The unemployment rate over the past three months has averaged 4.13%, 0.63 percentage points higher than the 3.5% forecast for July 2023. The Sarm Rule has accurately predicted every recession since the 1970s.
Goolsby said he doesn’t believe the economy is currently in a recession, despite the surprisingly weak jobs report.
A Wall Street sign in New York on January 27, 2023. (Photographer: John Taggart/Bloomberg via Getty Images/Getty Images)
“The employment report was weaker than expected, [are] “We’re not in a recession yet,” he said. “I think decisions should be based on a future projection of where the economy is going.”
Still, he acknowledged that interest rates, which have been at their highest levels since 2001 for more than a year, may be too restrictive.
“Should we ease regulation? I’m not going to tie us down on what to do going forward because we’re still getting more information,” he said. “But if we’re not overheating, then we shouldn’t be effectively tightening monetary policy or tightening regulation.”
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Policy makers decided to keep interest rates on hold at their meeting last week but left open the possibility of cutting rates in September.
A sharp slowdown in job growth and growing fears of a recession have investors increasingly pricing in the possibility of a significant rate cut of as much as 50 basis points.
