Overnight – Stocks grind higher as investors believe they will have their cake and eat it

Stocks ground higher overnight as recession fears continue to ease, while investors also expect super-sized rate cuts.

The bullish sentiment is ahead of busy week as the Fed releases the minutes of its July meeting, while chairman Jerome Powell is expected to offer clues on future monetary policy at the Jackson Hole central bank symposium on Friday.

Recession odds fall as Goldman Sachs revised its 12-month U.S. recession probability to 20% from 25%, citing the recent economic data that shows no signs of a downturn. The increase was positioned midway between the long-term average recession probability of 15%—based on the historical occurrence of a recession every seven years—and the 35% estimate during the bank turmoil in early 2023. The reversal in recession fears that’s taken place since Aug. 5 has come with “better data, which has made the US economy look sturdy and resilient again,” Macquarie said in a recent note.

The cooling recession fears comes ahead of busy week for clues on monetary policy as the Federal Reserve is set to lease the minutes from its Jul.31-Aug. 1 meeting, due on Wednesday, just days ahead of Friday’s Fed Chair Jerome Powell’s Jackson Hole speech on Friday. Powell’s speech is expected to lay out the carpet for a rate cuts in September, with current consensus betting on a 25 basis point cut.  Many analysts suspect that Chair Powell will outline the Fed’s strategy in the context of the data at Jackson Hole, and the FOMC minutes on August 21 should shed light on the decision not to cut in July and whether 50bp might be on the table,