The era of "Great Wait" economy has arrived, and the volatility in the coming months may be even more severe!

Investors are facing an old problem with a new twist: almost no one really knows where the US economy is headed. In fact, economists and market observers are having a hard time reaching a consensus on the current situation.

Faced with so much uncertainty, consumers and businesses are choosing to sit tight until they have a better understanding of the extent to which the Federal Reserve may cut interest rates in the coming months and the impact of its policy changes on the economy.

Callie Cox, Chief Market Strategist at Ritholtz Wealth Management, says that this is leaving investors puzzled and opening the door to more potential volatility in the months ahead.

Cox even coined a new term to describe this state of stagnation: "The Great Wait."

Using last Friday's employment data as an example, investors seem unable to agree on whether the report suggests a slow cooling of the economy or a more severe recession.

Cox notes that part of this confusion stems from the fact that businesses don't seem to be taking much action. Hiring has slowed significantly, but at the same time, companies also appear to be retaining existing employees.

Specifically, based on the average number of new jobs created in the past three months, the pace of job creation in recent months has dropped to the lowest level since 2020. Meanwhile, according to weekly unemployment claims data, layoffs have hardly increased. The latest Labor Department data shows that nearly 81% of Americans aged 25 to 54 are employed, the highest proportion in twenty years.

Consumers also seem to be in a wait-and-see mode, reluctant to change jobs or make major financial decisions such as buying a home.

Cox points out that, except for a period after the start of the COVID-19 pandemic, this summer saw the lowest rate of American workers quitting their jobs in six years.

Despite a drop in 30-year mortgage rates, pending home sales in July hit an all-time low.

Cox says, "We seem to have reached a point where interest rates are high enough, and the economic outlook is bleak enough, that ordinary Americans and businesses have decided to do nothing."

However, investors seem to be taking preemptive action and overreacting to every economic data point showing signs of weakness.

Cox says, "On the other hand, Wall Street seems tired of waiting. They have jumped straight to the recession stage, punishing every economic report that looks somewhat ominous."

So far, every sell-off has been followed by a wave of buying on dips, and the latest round of volatility in early September seems to be no exception.

On Monday, with a strong rebound in major US stock market benchmarks, the market recovered some of last week's losses, marking the worst week for the S&P 500 index since the collapse of Silicon Valley Bank.

Cox says that this erratic trading behavior may continue into the fall until investors have a better understanding of whether the feared recession will actually materialize.

Some believe that the Federal Reserve's refusal to provide specific guidance on the pace of rate cuts has added to the confusion and raised concerns that the Fed may have missed the optimal time to begin easing policy However, Natixis' global market strategist Mabrouk Chetouane believes that there is ample reason for the cautious attitude of senior officials at the Federal Reserve.

Chetouane said, "Maintaining this ambiguity is very important for the Federal Reserve, as it is the only way they can act completely freely according to their own wishes. Otherwise, the market may try to force them to take action."