Mortgages.scot

Unemployment in the US has risen to 4.3% according to data from the Labour department. This has triggered the Sahm Rule. Claudia Sahm invented this rule and it's used as a very accurate predictor of a recession. Although Sahm herself has come out suggesting it's not yet time to panic over the figures. Although the Dow Jones Industrial fell by 1.5%, the S&P 500 by 1.8% and the Nasdaq 2.4% household income continues to grow. Consumer spending and investment remains stable.

Her words are unlikely to have assured the markets though. Others have cited a significant slowdown in hiring during July having only 114,00 jobs added to the economy which is a large drop on the 12 month average of 215,000.

Unemployment in the USA is now at it's highest point since October 2021. The concerns in the markets are that this signals a faster coling economy that originally thought or expected. That points towards a recession.

Questions have been raised about whether the US central bank has taken too long to reduce interest rates resulting in a hard landing for the economy.

Short term investors like hedge funds have been selling in high volumes in the last couple of days. Although Hatfields suggest they are simply hesistant to stay long on stocks as the earnings season is at an end. They suggest the sell-offs seen are somewhat irrational.

There is also a suggestion that US global share prices have climbed too far, too fast in the last couple of years and that 'bubble' will burst. Top stocks such as Nvidia have seen a meteroic rise having to split stock 10-1 having reached $1,200 per share. They have continue to rise.

The FTSE100 was down 85 points whilst the FTSE250 fell by 240 points.

There is now more pressure on the FED to decrease interest rates, time will tell if they do. In the UK interests rates were reduced by 0.25% on the 1st August 2024 and I would consider the Bank of England just as cautious as the FED.

Here in the UK there is a huge reliance on the stock market for investment and in particular pensions, a weaker market could see pensioners out of pocket.

I am no expert but it does show how unstable markets can be and it ends up impacting us all in some way.

It will be interesting to watch over the next week or so but at the moment we can see the impact.