Wall Street Lowers Optimism Amid Slowing US Economy
Recent shifts in economic data have tempered Wall Street's optimism about the US economy.
Predictions are now being scaled back as signs of slowing activity emerge across various sectors.
Neil Dutta, head of economic research at Renaissance Macro, expressed his cautious outlook, stating, “Conditions are fine, but I would hardly describe the situation as consistent with a meaningful acceleration.”
Goldman Sachs, which has been bullish on the economy, revised its second-quarter GDP growth estimate down to 2.7% from 3.2%, citing weak spending momentum. Similarly, the Atlanta Fed’s GDPNow tracker dropped to 1.8% from over 4% earlier in May.
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Adding to the concerns, the Institute for Supply Management (ISM) reported a decline in manufacturing activity, with the PMI falling to 48.7 in May. This was below expectations and marked the second consecutive month of contraction after briefly entering expansion territory in March.
Other economic indicators also pointed to a slowdown. The April jobs report showed weaker-than-expected job growth and a rise in the unemployment rate. Retail sales for April were softer than projected, and there was a decline in first-quarter economic growth driven by lower consumption.
Despite these signs, the stock market has remained resilient, with major indexes hitting record highs in May. The Citi Economic Surprise Index’s negative correlation with the S&P 500 indicates that investors are viewing weaker economic data as a potential trigger for Federal Reserve interest rate cuts, which could benefit stocks.
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Bank of America’s equity strategist Ohsung Kwon noted that while the current data might support a favorable environment for stocks, a significant deterioration in economic growth could change this outlook. The upcoming May jobs report, expected to show 185,000 new jobs with unemployment steady at 3.9%, will be a crucial indicator.
Kwon suggested that if the labor market remains in a “Goldilocks” range—not too hot to spur inflation fears and not too cold to signal a slowdown—it could support further stock market gains.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
