Recession Trades Take a Breather: U.S. Economy Slows but Does Not Yet Stagnate
The recent turbulence in U.S. equity markets has market participants closely watching the weekly initial jobless claims data, due out at 8:30 PM Beijing time on Thursday evening, for signs of further weakness in the labor market.
Weekly initial jobless claims are typically seen as a leading indicator of economic activity, with declines suggesting improvement in the labor market and economic strength, while increases hint at potential weakening in economic activity.
Currently, the market is concerned about the possibility of not just a "short-term recession," but a "mid-to-long-term recession." We have some differing views.
Firstly, the Bank of Japan's recent dovish shift, emphasizing the need to "maintain an accommodative policy stance," not only helps alleviate current liquidity tightening pressures but also stabilizes financial market sentiment, providing greater confidence to global investors.
Secondly, the latest U.S. non-manufacturing PMI data and stable household debt delinquency rates further demonstrate that the U.S. economy remains fundamentally sound. The recovery in the services sector is particularly important, given that it accounts for over 80% of U.S. GDP.
Thirdly, despite the weak July employment data influenced by extreme weather, the U.S. economy is slowing but far from entering a recession. Fiscal policy remains accommodative, providing necessary support for the economy.
In terms of asset allocation, I believe there is limited room for further declines in U.S. Treasury yields in the short term, with a focus on potential upside risks. While the market expects rate cuts, the Federal Reserve may emphasize the resilience of the economy to prevent excessive pessimism. For investments related to U.S. Treasuries, investors might consider the $iShares 20+ Year Treasury Bond ETF (TLT.US)$ .
For gold, its long-term investment value has significantly increased. In the short term, geopolitical risks could drive up gold prices, and in the longer term, the start of the U.S. rate cut cycle will provide additional support for gold as a safe-haven asset. Investors can invest in gold through $SPDR Gold ETF (GLD.US)$ .
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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