A slowing economy is not always bad for markets.

This week showed why.

The biggest question facing investors is no longer whether growth is slowing.

It is whether growth is slowing at the right speed.

Let's start with the macro picture.

The US labour market finally showed signs of cooling.

Non-Farm Payrolls came in at 57K versus 114K expected, marking a clear slowdown in hiring.

Normally, weaker employment would create concern.

But markets viewed it differently.

Why?

Because other parts of the economy remain stable.

Unemployment actually improved to 4.2%, jobless claims remained controlled at 215K, and JOLTS showed labour demand holding at 7.59M openings.

This was not a collapse in employment.

It was moderation.

At the same time, inflation pressure continued to ease.

European CPI slowed to 2.8% from 3.2%, while Core CPI moved lower to 2.4%.

Manufacturing price pressures also cooled, with ISM Prices falling from 82.1 to 73.0.

Lower inflation pressure gives central banks more flexibility.

Growth data remained mixed.

US Manufacturing PMI stayed in expansion at 53.3.

Canada surprised positively, with GDP growing 0.5% compared with 0.4% expected.

But confidence softened, with US Consumer Confidence falling below expectations.

Growth is slowing.

But not breaking.

Central banks remain positioned for patience.

This week's COT report is unavailable due to the 4th July holiday.

Without positioning data, the focus shifts back to fundamentals.

That is the balance investors are watching.

Weak data is only supportive if it reduces inflation pressure without damaging growth.

Looking ahead, next week brings another test.

Is the economy weakening?

Or is it normalising?

That difference matters.

A sharp slowdown creates risk.

A controlled slowdown creates room for central banks to become more supportive.

For now, markets are leaning toward the second outcome.

The economy is cooling.

Inflation pressure is easing.

And investors are still searching for evidence that the soft landing can continue.

Strengthen Your Edge.

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