President Biden’s bold claim that he had „cured the economy“ last week quickly became the subject of ridicule as global stocks plummeted on Monday, triggering fears of a recession on Wall Street. The Cboe Volatility Index, or VIX, which measures the level of fear among investors, spiked to its highest level in four years, reaching 62.27 before trading opened. This surge in fear was a stark contrast to the relative stability the index had shown since the start of the pandemic, never closing above 40.
The catalyst for this market meltdown was the weaker-than-expected July jobs report, which revealed that the economy added just 114,000 workers last month, while the unemployment rate rose to 4.3%, the highest level since October 2021. This data added to mounting evidence that the economy is weakening, particularly in the face of high interest rates. The rise in unemployment also triggered the Sahm Rule, an indicator that suggests a recession is likely when the three-month moving average of the jobless rate is at least a half-percentage point higher than the 12-month low.
The slowdown in job growth has raised questions about the Federal Reserve’s decision-making, as policymakers voted to hold rates steady during their meeting last week. However, they did leave the door open for a rate cut in September, with more investors now pricing in the likelihood of a 50-basis point reduction due to the sharp slowdown in job growth and growing concerns of a recession.
President Biden’s claim that he had „cured the economy“ as part of his legacy as president now seems premature in light of these recent developments. The comment, made while speaking to reporters outside the White House, highlighted his desire to leave a positive impact on the economy and the environment. However, the reality of the current economic situation paints a different picture, with global stocks tumbling and fears of a recession looming.
As the situation continues to unfold, it remains to be seen how policymakers and investors will navigate the challenges ahead. The uncertainty in the markets underscores the importance of closely monitoring economic indicators and making informed decisions to mitigate risks and protect investments. President Biden’s claim may have been made in good faith, but the recent market turmoil serves as a reminder of the complexities and uncertainties that characterize the world of finance.