US Bond Market Rallies as Markets Increase Bets on US Rate Cuts in 2024

An array of US economic data has shown that the US economy may not be as strong, invincible, and exceptional compared to the rest of the world. The US stock market took a pause this week, undecided whether this is good news or bad news. The S&P 500 and Nasdaq paused slightly in the past five days, declining 0.27% and 0.96%, respectively. The Canadian S&P/TSX Composite lost 1.22%.

The latest Manufacturing PMI data and JOLTS jobs reports painted a disappointing picture of the US economy, which had continuously surprised the markets positively in 2024 to the extent that markets started to believe no rate cuts would materialize by year-end.

Some warned that although the stock market is doing well on the back of major tech companies driven by AI euphoria, cracks in the US economy are appearing, and if any recession hits, it will be unexpected. Treasury rates declined in the past couple of days.

Lower rates are beneficial for stock markets, but at the same time, they are causing the markets to worry about the economy and a potential recession, which is bad for the stock market. Once again, US investors are stuck between seeing the news as good or bad.

Any recession is not good for the majority of companies, but unless there is a deep recession—which is not a high-probability scenario right now—the US stock market should do well.

A side note on the northern neighbor: Canada is a different story, and right now, there is no positive scenario for Canada in the short term.