Founder Securities: Market pricing suggests the Fed may not cut rates in January, but could begin cutting rates as early as June.
PANews reported on January 10th that, according to a research report from Founder Securities, the December non-farm payroll data was mixed. The US job market as a whole is in a mild downward trend, but the unemployment rate has improved marginally, giving the Federal Reserve more reason to wait and see in January. Combined with the possibility that the Supreme Court may declare the IEEPA tariffs unconstitutional, this could be a short-term positive for US stocks and the US dollar, but a negative for US Treasuries. Data on new jobs, job openings, and hourly wage growth indicate that the US job market remained relatively weak in December, but the marginal decline in the unemployment rate was one of the few bright spots. Looking at the trends in interest rate futures and US Treasuries, the market priced in a no-rate-cut by the Federal Reserve in January, with a possible rate cut as early as June.
Meanwhile, the Supreme Court may soon declare the IEEPA tariffs unconstitutional, implying a marginal improvement in economic expectations and a weakening of inflationary pressures, but also a widening fiscal deficit. With the Federal Reserve in no hurry to cut interest rates and tariffs easing, short-term US Treasury bonds face numerous unfavorable factors and are likely to remain at high levels. US stocks, on the other hand, will benefit from the positive outlook for AI and reduced tariff disruptions, particularly in sectors impacted by tariffs such as consumer staples and industrials, which will show greater resilience.
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