Bad Omen

Weak employment statistics sounded the alarm that the US economy is at risk of falling into recession, which yesterday sent global stock markets tumbling on a day dubbed “Black Monday”.

US stock indexes fell an average of 3%, with the Nasdaq opening down 6.2% and the S&P 500 down 4%, while large tornadoes hit the Japanese economy, with the Riker index falling to 12.4%, and Spain, Hong Kong, China, South Korea and Taiwan also closed negatively.

The U.S. added 114,000 jobs in July, below market expectations of 175,000, and the unemployment rate rose to 4.3%, reducing investors’ confidence in the economy’s ability to overcome high interest rates without the risk of a recession.

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Even the biggest companies in the tech space (Nvidia, Alphabet, apple, Meta, Amazon and Tesla) sparked an investment frenzy in the first seven months of this year and are now entering a circle of skepticism among investors who have lost patience with the long-term monetization of their investments.

The Fed’s decision to maintain current interest rates until September has had a negative impact on market confidence. If the Fed cuts interest rates by an indicative 50 basis points in September instead of the usual 25 basis points, it would confirm that the US economy is on the verge of a recession.

There is a chance that Black Monday was only a short-lived storm, but the shock it caused to the capital markets was very severe in some cases, such as what happened in Japan, so the Dominican backyard should be wary of the strong winds that may be triggered here. Pity.

The government should review its debt policy very carefully and monitor the uncertainty of the US economy carefully, because even if the forecast of a recession is not met, a recession will occur relatively speaking when the unemployment rate exceeds 0, 5% in the past three months and drops to the lowest level recorded last year, because yesterday’s earthquake is considered a bad sign.