Tomorrow Is A Big Day For The Markets
This Friday’s US Jobs Report is not just another piece of economic data. It’s the linchpin that could influence the Federal Reserve’s decision on interest rates this month.
The buzz around Wall Street, which is being fueled by big names like Citigroup (C) and JPMorgan (JPM), is abuzz with predictions of a possible half-percentage-point interest rate cut.
Meanwhile, the consensus among most traders and economists still favors a more conservative quarter-point reduction.
Interest-rate swap contracts show roughly a 35% chance that the Fed will execute a jumbo cut (.5%) when it meets September 17th and 18th.
Why does this jobs report matter so much?
Here’s the deal: The market is in a volatile state, and this upcoming jobs report could tip the scales.
The Fed has been closely monitoring the labor market to guide its monetary policy.
And recently this focus has heightened the importance of employment data, making each report a potential trigger for market swings.
If the job numbers disappoint, (echoing last month’s miss) it could reinforce fears of an economic slowdown — which would compel the Fed to opt for more aggressive rate cuts as a form of economic stimulus.
On the other hand, a stronger-than-expected job growth report could suggest some strength in the economy. Which would support a “more measured approach”, meaning smaller rate cuts.
This leaves us in a position similar to the one we’ve been in for months: Volatility expected.
To put it simply: A miss in employment figures, similar to last month, could press the Fed into more aggressive action to counteract a perceived slowdown. Conversely, if the jobs data comes in strong, it might justify a lighter touch, aligning more with the quarter-point expectation.
The stakes are high this week, and the treasury market is bracing for significant moves.
If you listened to our Roundtable Session today, me and the guys talked a lot about this volatility.
Remember that a rate cut doesn’t necessarily mean markets go up… and rates staying high doesn’t necessarily mean the markets go down — it’s a pretty mixed bag.
So trying to guess what means what, and play directional moves is a very tough game. I prefer alternate strategies focused on income and multi-directional plays like pair trades.
And I think this will be the case all the way through the election. We have debates, we have economic data, we have inflation data, we have the rate cut decision itself…
All of them are potential market-moving catalysts.
In the immediate term, stay sharp, keep an eye on the numbers, and prepare for all scenarios tomorrow.
Be sure to watch the Roundtable Session replay for some specific trade ideas too!
— Nate Tucci
