Shift in Rate Cut Expectations
Recent robust economic data has led to a reduction in market expectations for a 25 basis point rate cut this year.
Jobs Report Boosts Confidence
The unemployment rate dropped to 4.1% with a significant addition of +254,000 jobs in September, surpassing expectations and easing concerns about the labor market.
Services Sector Strong, Manufacturing Subsides
While the services sector shows strength with a PMI of 54.9, manufacturing has slowed down. However, as services make up a larger portion of the economy, the overall expansion remains steady.
Consumer Spending Revisions
Revised consumer spending data indicates sustainable growth, supported by increasing incomes, contributing to a positive outlook for the economy.
Steady GDP Growth
With the service sector and consumer spending performing well, real GDP is forecasted to grow at a strong pace of +2.5% in Q3, building on the positive momentum from the first half of the year.
Inflation Levels Suggest Rate Cut Justified
Headline PCE inflation is close to the Fed’s 2% target, providing justification for rate cuts and aligning with the Fed’s preference for gradual 25bps reductions.
Overall, the economy shows signs of strength, supporting the Fed’s cautious approach to rate adjustments. Stay tuned for upcoming data releases that could influence future decisions.
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