Markets Seem Dependent On Rates

Friday's Jobs Report seemed to all but guarantee a rate cut later this month by the Fed - at least in the minds of investors. The market was expecting 75,000 jobs created in

August, but only 22,000 were reported. The Unemployment Rate ticked up to 4.3%, as expected. Futures on this month's rate decision now include three 25 basis point rate cuts at each of the last 3 Fed meetings for 2025. If that indeed is what happens, then it would provide a needed tail wind for consumers and businesses in the U.S.

We will get the first inflation data this week for the month of August. According to the

Cleveland Federal Reserve, August Consumer Price Index is expected to come in at +0.3%, which would take the year-over-year figure to 2.8%. That is just a slight increase over the current rate of 2.7%. If those numbers hold true on Thursday, hopes of a rate cut this month should stay in tact. Anything higher could put investors on the defensive about rate cuts.

A rate cuts by the Fed could be even more bullish than some anticipate. The common

investing phrase is "buy the rumor, sell the news." However, when equities are growing and the Fed is accommodative, equities typically continue growing. In the 34 occurrences, when the Fed was cutting rates and forward EPS was growing above average, Price-to-Earnings ratios didn't contract, but rather, expanded further. Sticking to long-term investment and financial plans is the best play for investors right now in the face of uncertainty.

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