The average stock market participant waited for over a year for the Federal Reserve to cut interest rates. Hope grew stronger after the central bank stopped hiking rates. Next month, a rate cut of 25 bps is nearly guaranteed.
Markets will express no surprise when rates fall. Bank stocks have already been trading at a high level for the year. Look at JP Morgan (JPM), Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC). Yesterday, markets closed higher after reviewing the Fed’s latest meeting minutes. Most fed officials favored a rate cut in September. This is conditional on inflation continuing to fall.
Unfortunately for consumers, official government reports are inaccurate. Month after month, the BLS posted job growth. The Labor Department reported yesterday that total payroll employment from April 2023 to March 2024 was overstated by 818,000. This would change the figure by 0.5%. The average monthly job gain would fall from 242,000 to 174,000.
Despite the inaccuracies in job reports, private education, health services, and government added jobs.
Looking ahead, August’s inflation report may not show price hikes are moderating. That would delay the Fed from acting too quickly. It would decide to hold interest rates in September but cut them in November or December.
