What is Moody's economist Mark Zandi's assessment of the US economy?

Moody's economist Mark Zandi warns that the US economy is "at the precipice of recession" and the economic data is "uniformly bad to ugly."

How does the current situation with President Trump's tariffs impact the Federal Reserve's ability to cut rates?

The Fed may be forced to hold back on rate cuts due to inflation pressures from the tariffs, even as investors are betting on rate cuts to stimulate the economy.

Home / Business and Economy / Investors Bullish Despite Economist's Recession Warning

Investors Bullish Despite Economist's Recession Warning

Q: Why are investors bullish on the stock market despite the gloomy economic outlook?

Investors are anticipating that the Federal Reserve will cut interest rates later this year, which they believe will boost stock prices.

8 Aug

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Summary

US economy "at the precipice of recession" per Moody's economist
Investors anticipate Fed rate cuts, driving up stock prices
Weak labor market and declining consumer enthusiasm ignored by traders

Investors Bullish Despite Economist's Recession Warning

According to the latest economic data, the US economy is in a precarious position as of August 8th, 2025. Moody's chief economist Mark Zandi has sounded the alarm, stating that the data is "uniformly bad to ugly" and the country stands "at the precipice of recession."

However, investors on Wall Street appear to be ignoring these macro risks. Stock prices, especially in the tech sector, have been rising sharply in recent days. This bullishness is driven by the expectation that the Federal Reserve will cut interest rates later this year to stimulate the economy.

The contrast between the gloomy economic outlook and the optimism on Wall Street is stark. Last week's dismal jobs report was the latest in a series of concerning data points. Zandi noted that "once I really sat down and started looking at all the data, I go, 'Oh, gosh! This economy is really struggling to move forward.'"

Despite the fragile state of the economy, traders seem to be betting that the Fed will ride to the rescue with rate cuts. Goldman Sachs is currently predicting three rate cuts this year, followed by two more in the first half of 2026. However, the central bank may be forced to hold back due to inflation pressures from President Trump's tariffs.

As the economy teeters on the edge of recession, investors appear to be ignoring the fundamental risks and focusing solely on the prospect of cheaper money boosting stock prices.

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