Markets Catch Their Breath After the NFP Storm
Calm Returns After Friday’s Fright
On Tuesday, August 5, 2025, international financial markets are gradually regaining their composure after a catastrophic Friday that spread panic among investors. The release of US employment figures (NFP - Non-Farm Payrolls) created a major shockwave across global stock exchanges.
A Disastrous NFP Release
The US non-farm employment data, published last Friday, fell far short of market expectations. Not only were job creations much lower than forecast, but June numbers were also significantly revised downward, further worsening the US economic picture.
This disappointment immediately triggered a chain reaction in the markets. The VIX, a volatility index often called the fear index, measures market uncertainty. The VIX jumped 20% in a single day, reflecting the extent of investors’ anxiety in light of this alarming economic data.
A Restorative Weekend for Reflection
Fortunately, the weekend pause allowed markets to digest the news and investors to take a step back. This breathing space proved beneficial, avoiding a cascade of panic selling that could have further amplified volatility.
In the end, the S&P 500 managed to hold the crucial level of 6220 points, a key technical area on the H4 timeframe which serves as a major support. The resilience of the US market demonstrates the underlying strength of the indexes, despite surface-level turbulence.
The Resilience of US Indexes
Technical analysis reveals that US indexes remain bullish in the medium term. The 50-day moving averages continue to act as support, whether on the S&P 500, Dow Jones or even the Nasdaq. This technical setup suggests the underlying trend remains intact, despite recent swings.
This resilience in US markets contrasts with the relative weakness seen in Europe, where indexes have greater difficulty holding their levels. This divergence isn’t new and fits a long-term trend where the US consistently outperforms European markets.
A Radical Shift in Monetary Policy Expectations
The most significant impact of these poor NFP numbers is seen in changing expectations for US Federal Reserve monetary policy. On Wednesday evening, Jerome Powell had clearly indicated he was not considering an interest rate change for September, hinting at a cautious approach.
However, the catastrophic employment data completely changed the landscape. Before the NFP release, markets expected only one rate cut by year-end. Now, investors are betting on three cuts, reflecting growing concerns about the US economic slowdown.
Signs of an Economic Slowdown
This deterioration in the US labor market appears to confirm fears of a slowing US economy. Several factors contribute to this situation, notably the impact of tariffs, which are beginning to weigh on economic activity. Business visibility is shrinking in this climate of trade and geopolitical uncertainty.
This delicate economic situation explains why the Federal Reserve may be forced to adopt a more accommodative approach than initially planned, hence the expectation of multiple rate cuts by the markets.
Europe: Persistent Weakness
On the European side, the situation remains worrying, with declining moving averages signalling ongoing structural weakness. This European underperformance compared to the US is not a new phenomenon, but it is once again confirmed amid heightened volatility.
European markets struggle to find strong enough catalysts to reverse the downward trend, unlike the US, which still enjoys a more favorable economic momentum despite recent warning signs.
Gold: An Opportunity Seized
In this environment of uncertainty, gold played its traditional role as a safe haven. Breaking through the technical level of $3,280 an ounce presented an excellent entry opportunity for savvy investors. The precious metal responded perfectly to this window of opportunity and now trades mid-range, confirming its ability to attract capital during stress periods.
Cryptocurrencies: Volatility and Opportunities
The cryptocurrency market continues to provide interesting opportunities for active traders. Waves of rebounds and corrections come one after another, creating an ideal environment for active portfolio management. Positions on Ethereum (ETH) and other major crypto-assets have benefited from this increased volatility.
This asset class once again demonstrates its ability to evolve somewhat independently of traditional markets, while also offering substantial profit opportunities for investors willing to accept higher risk.
A Calm Week Ahead
Paradoxically, after last Friday's storm, this week is set to be particularly quiet on the macroeconomic front. The economic calendar is virtually empty, which should allow markets to stabilize and investors to regain their composure.
This lull in economic data releases comes at the right time, enabling a progressive normalization of volatility and a better assessment of economic fundamentals without the noise of weekly announcements.
Strategy: Selectivity and Discipline
In this context of high volatility but intact underlying trends, the optimal strategy is to maintain a selective and disciplined approach. It is advisable to stay active to exploit volatility spikes without succumbing to excitement in either direction.
Active management enables the capture of these erratic moves while preserving capital over the long term. This balanced approach is particularly well suited to current market conditions, where opportunities exist but require rigorous analysis and precise execution.
Conclusion: Vigilance and Opportunism
The calm observed this Tuesday, August 5, should not make us forget the warning signs sent by the US economy. While markets have shown technical resilience, economic fundamentals deserve close attention in the coming weeks.
Astute investors will therefore maintain a prudent yet opportunistic approach, ready to seize opportunities while remaining vigilant to the risk of new volatility episodes. Adaptability and discipline will remain the keys to success in this complex and evolving environment.
Xavier Fenaux
August 5, 2025