Did you know that the unemployment rate is often a lagging indicator, meaning it reflects the state of the economy several months after conditions have changed?

Don't rely on the unemployment rate to determine the current economic situation; consider other leading indicators like GDP growth or consumer spending.

Here's what you can expect in this edition:

• What Caused The Early August Stock Market Sell-Off? First, we’ll take a closer look at the factors behind the recent stock market dip 📉

• What’s Next For Stocks? Next, we’ll give an analysis of the rising unemployment rate and what it means for the stock market 🤔

• Will The Fed Do An Emergency Rate Cut? Finally, we’ll explore the speculation surrounding a potential emergency rate cut by the Federal Reserve ✂️

Stay informed and ahead of the curve with our expert insights into the financial markets. Y’all ready?

What Caused The Early August Stock Market Sell-Off? 📉 

Recently, there was a sell-off, and many are asking what led to this.

First, U.S. economic data have changed, raising questions about whether the soft-landing scenario is still intact 📊

Monthly job growth averaged around 200,000 for the past 12 months, but the economy added only 114,000 jobs in July.

The Federal Reserve began raising interest rates in March 2022.

There are long and variable lags in the impact of monetary policy, as the Fed likes to emphasize.

There are concerns that we have reached the destination—the point at which the lagged impact is finally pulling the economy lower.

Second, the yen carry trade has begun to unwind 💴

Many U.S. investors, and others, had borrowed money in costless yen and bought higher-yielding U.S. fixed-income assets—Treasuries and corporate bonds.

More recently, their purchases expanded to include equities, specifically, the Magnificent Seven tech stocks.

The Bank of Japan recently raised interest rates to 0.25% while the Fed is expected to cut rates beginning in September.

The shift sparked an unwinding of the carry trade, which magnified the losses in the S&P 500 index and Nasdaq, and perhaps in Bitcoin and other assets boosted by that trade.

What’s Next For Stocks? 🤔

Let’s examine why the unemployment rate is going up.

It isn’t because more people are getting fired.

The unemployment rate seems to be rising, instead, because of increased immigration.

More people are looking for jobs.

If that’s the case, the rise in the unemployment rate to 4.3% as seen in the July jobs data isn't so worrisome, especially as gross domestic product grew by 2.8% in the second quarter.

The sell-off in stocks is a good buying opportunity 🤑

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Will The Fed Do An Emergency Rate Cut? ✂️

Recession fears have led some on Wall Street to call for an emergency interest-rate cut before the Fed’s next policy meeting in mid-September.

Does this make sense?

No.

The Fed will only cut interest rates on an emergency basis if there are financial-stability risks before Sept 18 😨

There is no need, from the economic data or a financial-stability perspective, for an inter-meeting emergency cut.

At the moment, the probability is close to zero.

Inner Circle Global Macro Update 🔍

If you wish to gain access to our Inner Circle Global Macro Update, packed with exclusive insights from award-winning portfolio manager and economist Seth Antiles, with secrets that’ll give you an edge in the stock market, be sure to upgrade by clicking the button below 👇️