The U.S. economy may be ‘bad to ugly’ right now but investors are loving every minute of it

Finance·The U.S. economy may be ‘bad to ugly’ right now but investors are loving every minute of itBy Jim EdwardsBy Jim EdwardsExecutive Editor, Global NewsJim EdwardsExecutive Editor, Global NewsJim Edwards is the executive editor for global news at Fortune

He was previously the editor-in-chief of Insider's news division and the founding editor of Insider UK

His investigative journalism has changed the law in two U.S. federal districts and two states

Supreme Court cited his work on the death penalty in the concurrence to Baze v

Rees, the ruling on whether lethal injection is cruel or unusual

He also won the Neal award for an investigation of bribes and kickbacks on Madison Avenue.SEE FULL BIO Clint Eastwood on the set of The Good, The Bad and The Ugly, by Sergio Leone.Getty ImagesU.S. economic data is “uniformly bad to ugly” right now and the country stands “at the precipice of recession,” according to Moody’s Mark Zandi but investors are bullish, driving up stock prices—especially in —because they are anticipating that the Fed will cut interest rates later this year

However, the Fed may be forced to hold back due to inflation from President Trump’s tariffs

The current bullishness on Wall Street is a stark contrast to what economists are seeing in the macro data

Last week’s dismal jobs report being the most recent aspect of that. “We got what I would call an economic data dump last week, lots of data

And they were all uniformly bad to ugly,” Mark Zandi, Chief Economist of Moody’s Analytics, said on The Concord Coalition podcast “Facing the Future.” Zandi added later, “I set off the alarm bells this weekend in that post, just because once I really sat down and started looking at all the data, I go ‘Oh, gosh! This economy is really struggling to move forward.’ And thus, ‘at the precipice of recession,’ I think, applies.” So if the economy is fragile, why are investors buying? Because they are expecting the Fed to step in with interest rate cuts to rescue their bets. (Cheaper money generally turns into stronger demand for equities.) Goldman Sachs is currently predicting there will now be three rate cuts this year: “A weak U.S. labour market report last Friday (August 1) has raised market concerns over the U.S. economic outlook, driving a significant front-end-led rally in U.S. rates

We see room for this repricing to continue, as our baseline expectation remains for the Fed to cut rates three times this year, and two more times in H1 next year, and we see room for market pricing to shift in excess of that,” Tadas Gedminas told clients in a note seen by Fortune

His colleague Vickie Chang says that the fundamentals—a bad labor market and declining consumer enthusiasm—are essentially being ignored by stock traders today. “The core risk to growth pricing is something that threatens the market’s belief that it can look through current weakness and discount the spect of recession,” she said in a re note

So, cuts from the Fed are in the mail, right? Not so fast

Zandi is gloomy that, too

President Trump’s tariffs and his restrictive immigration policy “raise inflation and weaken economic growth

So if you’re at the Fed and you have a dual mandate to maintain full employment, economy, and low and stable inflation, that gets pretty difficult

Explore this year's list.