I am sticking with my call of a 50 basis point cut by the Fed this month. The Jobs report on Friday and the CPI report next week will determine the fate.
Tomorrow ADP will provide a preliminary indicator to the BLS job report on Friday.
If the jobs report is weak enough or the next CPI report is favorable enough, the Fed will cut 50 basis points on September 18. A quarter-point cut is baked in the cake.
If the Fed doesn’t cut by 50 basis point, my next bet is the Fed will regret that decision in October.
There is no FOMC meeting in October.
I am working on a CPI forecast now. I expect a very rate-cut friendly report on September 11, details coming up.
Nearing the Point Where Unemployment Is Greater Than Job Openings
Meanwhile, please note we are Nearing the Point Where Unemployment Is Greater Than Job Openings
Since I think openings are inflated, I suspect we have already hit the tipping point.
Finally, I suspect but cannot prove that many firms are holding back layoffs until after the election. If so, all hell will break loose in November or December.
can they survive JPY carry unwind if they cut 50bps
JPY carry unwind is not over, am still in the trade looking for at least sub 140 in 2024.
Rode it right thru the lows at 142 and bounce to 149. Very hard to know what will happen before hand and waited looking for second leg down to show its face. It is setting up support at 143.
Much will depend on USD as you point out. That performance definitely tied to what is coming from Fed and how fast economy deteriorates.
Since people with money are still spending and lower 50% no longer really matters as they have no buying power, if equities dump then that wealth effect will impact in a large way.
Still going with Stagflation as current state of affairs.
Companies are putting Hiring into the cooler locker, but are not at stage of mass layoffs everywhere. Am expecting Jobs numbers to be quite modest but still positive.
Inflation is not tamed but also expecting to be continuing its moderating path.
Fed will be unable to front load interest rate cuts as data will not support it. 25 Basis is where I think things are at.
I think it’s a safe bet to place on a .50bp cut. This administration needs votes and badly. Anything to stem the flow of negative news, they are begging for! They would love more, but could never deal with the negative fallout from such a move. I feel as though they will be pushing the envelope already.
The ADP will provide a preliminary (skewed version) indicator to the BLS job report on Friday. This will provide some Cover for their .50bp decision imo. With no meeting in October their decision was already made awhile ago imo.
I don’t just suspect but I am sure the Administration has begged the Larger Employer’s Not To Cut Yet! They would love to force the Republicans to have to start out with massive layoffs to start their term! The MSM will try to eat them alive for it, in a very failed attempt, but that’s what they do!
TNX 1M BB : 5.02%/4.66%. Oct 2023 high was 4.997%. After failing to breach the BB it dropped below support @3.917% and closed @3.764%. TNX might try again or drop to the next support @2.843%. If it gets there it will be its first lower low since 2020 low. From there TNX might rise above the 5% to the next BB.
BB : Backbone.
Hopefully, this will be the start of another massive bull market.
1W SPY might drop to its first lower low.
The Fed extracted all negative rates in Europe and Japan and cooled the CPI. If the Fed cut rates SPY should celebrate.
The last great engine of the world economy is sputtering out – Both China and the eurozone are in a slump and no one looks ready to take the baton from the stalling US
Now what?
Print baby print!
/s
So the Fed is going to screw the retired again, anticipating that Congress will cut the taxes on Social Security to compensate? I have enjoyed getting 5% on my bond portfolio and will miss decent rates.
Yep.
Relying on Social Security is a poor retirement strategy. As is expecting interest rates to pay a decent return above the inflation rate.
Zero or near zero in 2025. $35 trill in Federal debt alone? States? Counties? Cities? Corporations of all kinds? Nobody wants to waste their budget and spending on interest from someone’s past borrowing? And the world didnt blow up from 0% in 2006-2020. The rich just ended up a lot richer.
A .50 cut is election interference. Not that the FED cares. But to hold rates (IMO they should have gone higher) for so long, and then do a .50 cut 7 weeks before the election…like they couldn’t see what was coming…is pure BS. I still think it will be ,25 because that is baked and .50 might be enough to seriously spook the market, 7 weeks before the election. And since they are clearly intent on inserting themselves into the politics, I think go .25 so as not to risk a market event.
And that whopping 818K jobs revision was the biggest in 15 years. These days it’s not hard to believe that the entire system is doing everything it can to ensure the Orange Haired Guy doesn’t win. Any government data nowadays is fair game for holding that it’s subject to political influence.
Personally, I do think the labor market is slowly softening, but without that massive downward revision, I think the chances of just a 25 BP cut would have stayed priced in. As expected, everything is month-to-month at this point. Friday’s jobs data & next week’s CPI, like Mish says, will seal the rate cut fate. Everyone knows this.
I agree with Mish. 50 BP is where the Fed will land, but I wouldn’t be surprised to see no real deterioration of the Sept jobs data when reported in October.
My base case remains that $1.92T in deficit spending is very anti-recessionary when combined with all the extra demand created by our new residents. Consumer sentiment is up along with reasonable spending. Manufacturing, while weak, still hasn’t fallen off a cliff.
A 50 BP drop will push the 30YFM down to 6% or possibly below. Housing sales have picked up and will continue. Unemployment claims are falling again and remain quite far from pre-recessionary levels of sustained 250K+.
I agree. The Fed pulled back too soon. Min 6% FFR should have happened.
I know the politburo prints inaccurate CPI stats but I don’t understand how inflation numbers remain even this good with the amount of money printing going on. The Japanese did it but somehow managed to have subdued inflation, even though their currency value declined. I know there are a lot of moving parts but there seem to be no consequences other than producing K shaped economy where the rich get richer and poor get poorer. The groundwork for the fourth turning.
If the Fed cuts 50 basis points Trump should rejoice.
Think about that, then agree.
I see the logic in that rejoice!!
Latest Polymarket betting has Trump 53%, Harris 47%, $785M wagered. Foots nicely with Nate Silver’s latest numbers, also showing a huge swing for Trump in just the last two weeks. London market much the same, which incidentally has called every election since 1866 but two: Truman/Dewey and Trump/Hillary. The media-driven Kamala sugar high is over and it’s nap time.
Yep, aware and I agree
Said last year that a huge part of the pro-Trump population became very dissatisfied with his over-zealous take on vaccines/warp seed and shifted to RFK solely on that basis. What we’re now seeing is the RFK effect post endorsement.