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Market Tug of War: When Fed Forecasts Clash with Consumer Skepticism

As August comes to a close, Americans are left to wonder where they should put their trust as Fed predictions and stock market values just don’t seem to align. Just 30 days after the Fed Chair Jerome Powell said the central bank no longer forecasts a recession this year – a shift from previous meetings when the committee left the potential for a recession on the table – the final week of earnings season’s stock value leaves investors questioning if consumer distrust could shift predictions of the US economy back to another 2008-like crisis.

Dispite the positive outlook from the Fed, analysts still predict that with core inflation remaining sticky, the Fed is likely to maintain a ‘higher for longer’ policy regarding interest rates and may even choose to raise them further, causing concern for consumers who are already tightening their wallets in the retail space. Retail giants have already seen the effects of this as the stock market plunged in the last week of August, sparking the crucial question: “Has the US consumer hit their limit?” The S&P 500 witnessed a series of double-digit plunges in the retail sector, driven by weak earnings, poor guidance, or a disheartening combination of both. Unsurprisingly, the Retail ETF faced relentless declines throughout the week, consistently underperforming the broader market.

The deteriorating state of consumer credit, as illuminated by the disappointing earnings reports from giants like Macy’s and Nordstrom, serves as a warning sign. The trend takes on added significance with the impending resumption of student debt payments in the coming months. As we brace for the gradual phasing out of the trillion-dollar deficit-funded “Bidenomics” stimulus, the outlook appears ominous.

Are We on the Brink of Another 2008? The whispers of a potential stock market crash have grown louder in recent times. With corporate bankruptcies reaching alarming heights, Wall Street is grappling with fears of deflation, reminiscent of the 2008 financial crisis. Morgan Stanley’s chief stock strategist, Mike Wilson, points out the challenges ahead for stocks and the strain on credit markets, still recovering from historic losses.

In the face of these tumultuous market conditions and conflicting market predictions, one question emerges: where can investors find stability? The answer could lie in safe-haven assets, and one option stands out: precious metals. As the bear market deepens, the allure of assets like gold and silver becomes ever more apparent. Observing the actions of international banks offers a glimpse into this trend – these institutions are rapidly accumulating gold as a hedge against the looming possibility of digital currencies.


Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Past performance is not indicative of future results.