Why Wall Street is ‘out of the way’ with the true economy

The financial markets continue to gather, but a look under the surface paints a much more risky image for the coming months. Many investors now warn that Wall Street is ignoring the growing cracks in the United States labor and real economy, a disconnection that has generated important problems before.

Why Wall Street is so out of passage

The story shows a persistent pattern. As the end of the macro game pointed out, when work openings decrease and unemployment is done, the stock market often continues to rise, until reality arrives.

In 2001, 2008, and again in 2020, the actions remained floating with the hope of a rescue of the Fed or narratives of “Nueva Era”, only to fall hard when the weakest job data began to reach the company’s profits. Usually, this “fall” came within 6-12 months and:

“He was not gentle; he came with an acute fall and a recession.”

We are seeing the same configuration today. August’s job data were much softer than expected, with only 22,000 new aggregate jobs and the unemployment rate increased to 4.3%.

Meanwhile, the S&P 500 remains close to maximum record. The optimism of Wall Street is based on the expectations of cuts of imminent feeding rates, easy liquidity and implacable impulse of technological actions.

The markets are “purchase time” in the belief that central bankers will resolve everything, but the labor market is already losing land.

Companies are slowing hiring, and long -term unemployment is increasing. Once the weakest work figures reach corporate gains, Wall Street generally fits rapidly, and that adjustment tends to be acute.

This gap between the optimism of Wall Street and the reality of Main Street is not sustainable. When the Fed rates cuts arrive, they can cushion the landing or even trigger short -term manifestations.

However, the story shows that the deterioration of job data wins in a short time, dragging the prices of the lowest actions as analysts reduce profit forecasts.

The risk: sudden correction

The current Wall Street rally is driven by liquidity expectations, not the solid foundations. In previous cycles, these disconnections have led to a painful correction when markets are finally “reduced” to economic reality.

Looking beyond the actions, Bitcoin and the broader cryptographic markets have strongly responded to these macro signals. At the beginning of September, as weak job numbers illuminate the hopes for cutting tariffs, Bitcoin increased more than $ 113,000.

With the PPI data and the CPI data that confirm expectations this week, the probabilities of a rate cut at the next meeting of the Federal Reserve exceed 90%, and the markets have a price in the expectation of more liquidity in the system, with the price of bitcoin that reaches more than $ 116,000 at the time of writing and Ethereum higher than $ 4,700.

Digital assets exchange the macro narrative; When the real economy slows down and central banks are facilitated, merchants are inclined to the risk and inflation settes such as Bitcoin.

If the story is repeated, a sudden variable income correction could push more investors to Bitcoin and Crypto, as well as a coverage as a speculative work in monetary flexibility.

The weakening of labor markets, more fed stimulus and persistent dollar risk provide a backdrop where digital assets become attractive alternatives to shares.

The investor approach can go from pursuing technological actions to seek refuge in “hard money” such as Bitcoin and gold if the recession risks become real.

One thing is safe: Wall Street and Main Street separate. Actions can remain high for a few more months, but the softest work numbers and weak employment trends have a history of reversing the euphoria of the market.

Merchants who bet on Fed support may not see problems immediately, but when the disconnection closes, it can happen quickly.