9A rate cut is set? Get ready for a waterfall.
August employment data is seen as supporting a 25 basis point rate cut by the Fed
Melissa Brown, managing director of SimCorp, said the U.S. labor data puts the Fed on track to start an easing cycle at its usual 25 basis point pace later this month.
The increase in employment to 142,000 in August was below expectations but could support the view that the labor market is slowing rather than collapsing. The unemployment rate fell to 4.2% from 4.3%. "It's certainly not a sign that we're in trouble," Brown said.
She noted that wage indicators are accelerating, fueling inflation concerns. On the CME FedWatch tool, the probability of a 25 basis point rate cut fell to 53% from 60% yesterday, suggesting that investors are increasingly divided over the size of the first rate cut.
But again, you must have a contrarian mindset in the capital market. Big positives and big negatives. Get ready for a waterfall.
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