US Stocks Hit New Highs Despite Rising Recession Fears
US stock markets have hit new record highs despite growing recession fears. This is largely due to increased American household investments in equities, with 45% of their financial wealth now in stocks. Meanwhile, the possibility of a US recession is rising, and markets are pricing in a high likelihood of further interest rate cuts. Elsewhere, the situation in Ukraine has escalated as Trump has given the green light for Ukraine to use long-range weapons against Russia.
The surge in stock market highs can be attributed to several factors. American households have been investing more in equities, with stocks now making up 45% of their financial wealth by Q2 2025. This growth has been supported by favorable retirement plans and increased direct market participation. Even amid economic and political turbulence, including weak labor data and persistent inflation around 2.9%, stock prices have reached historic peaks.
On the economic front, a US recession is looking increasingly likely. Recent employment data has fueled these concerns. In response, markets are now pricing in a high probability of two more rate cuts by the Federal Reserve. Despite these headwinds, US stock markets have continued to reach new all-time highs, reflecting investors' optimism about the long-term prospects of the economy.
The US stock markets' resilience, despite recession risks, highlights investors' confidence in the long-term growth potential of American companies. However, the escalation in Ukraine, with Trump's approval of long-range weapons for Ukraine, could introduce geopolitical risks that may impact global markets in the coming months.
