The United States' July non-farm employment report "shocked" the market, with the shadow of recession looming over Wall Street. The market is betting on a large-scale interest rate cut, and Goldman Sachs has raised the possibility of a recession.

On Monday, Goldman Sachs' Chief Economist Jan Hatzius increased the probability of the United States falling into a recession within the next year from 15% to 25% in a report.

Goldman Sachs expects the Federal Reserve to cut interest rates by 25 basis points in September, November, and December.

In addition, Goldman Sachs stated that if its forecast is wrong and the August employment report is as weak as July's, there is a high possibility of a 50 basis point rate cut in September.

In contrast, JPMorgan Chase and Citigroup have adjusted their forecasts, expecting the Federal Reserve to cut interest rates by 50 basis points in September.

However, Hatzius believes that even if the unemployment rate rises, there is no need to worry too much about a recession.

The economy continues to be "generally good", there are no significant financial imbalances, the Federal Reserve has a lot of room for interest rate cuts, and can act quickly if needed.

At the same time, the U.S. bond market is in turmoil, with the two-year U.S. Treasury bond rebounding strongly. Bond traders are betting that the U.S. economy will deteriorate rapidly, and the Federal Reserve will need to start cutting interest rates significantly.

Traders expect the Federal Reserve to cut interest rates five times before the end of the year, which means the market expects a 50 basis point rate cut at the Federal Reserve's next three meetings. The Federal Reserve has not made such a large interest rate cut since the pandemic or credit crisis.

This has driven the largest rebound in U.S. Treasury bonds since the banking crisis in March 2023. The yield on the policy-sensitive two-year U.S. Treasury bond fell by half a percentage point last week, to below 3.9%.Since the global financial crisis or the burst of the internet bubble, the two-year yield has never been lower than the Federal Reserve's benchmark rate (currently around 5.3%) by so much.

Furthermore, Buffett's significant sell-off in the second quarter has also intensified market concerns. Cathy Seifert, an analyst at CFRA Research, commented that Buffett's substantial selling might be due to recession worries, stating that Berkshire is a company that "prepares for a weak economic environment."