Markets Shrug Off Strongest US PMI Since 2022 as 92% Hike Odds Mask Downturn Fears
Updated
Updated · tastylive · Aug 25
Markets Shrug Off Strongest US PMI Since 2022 as 92% Hike Odds Mask Downturn Fears
1 articles · Updated · tastylive · Aug 25
Summary
Friday’s US PMI showed the fastest business-activity expansion since 2022, led by services, yet stocks, the dollar and Treasuries barely moved—signaling traders see the surge as an outlier.
Three weeks of softer data have carried more weight: weak retail sales, lower consumer confidence and easing CPI and PPI pressures point to cooling demand in an economy where consumption drives about 68% of output.
Rate pricing looks hawkish on the surface, but the 92% chance of at least one Fed hike by December is cumulative; each remaining meeting is roughly a coin toss, with December itself near 45%.
Market gauges reinforce the slowdown view: Citi’s economic surprise index has turned sharply lower, Atlanta Fed GDPNow has trended down through August, and inflation breakevens have stayed muted even as crude rebounds.
Friday’s Jackson Hole speech by Fed Chair Kevin Warsh is now the key test, with any strategic vagueness likely read as less urgency to hike—potentially pressuring the dollar, lifting gold and unsettling stocks.