Is the Fed Headed for a Rate Cut Amid Indecision and Inflation?

Analysis by Joshua Mahony, Chief Market Analyst at Scope Markets.

Transcript

00:00Okay, well, let's bring Josh back, Josh Mahoney from Scope Markets.

00:04Josh, it looks a bit on again, off again when it comes to this possible Fed rate cut.

00:10What's your take?

00:13I mean, I guess that should be indicative of the indecision that's within the Fed at the moment.

00:18Certainly, the Fed is split, and we are in a position where they have to weigh up two sides of the dual mandate.

00:24One side of it is the jobs market, which, of course, has been deteriorating,

00:28and one side is inflation, which has been elevated and is well above the 2% target.

00:33So when you hear from one Fed member, they might say something very different from the next Fed member.

00:39This time around, we've been hearing from the Vice Chair Williams on the back end of last week.

00:43He's essentially said that he thinks it makes sense for them to cut in the near future.

00:48People have taken that as December, so now markets are pricing roughly a 75% chance that we see a cut by year end.

00:55Of course, we just saw the September jobs report as well.

00:58A beat on the headline number, a deterioration in terms of revision for the August number,

01:02a rise in terms of unemployment, and the expectation that we're probably going to see that headline number revised down anyway.

01:08Markets took that as a negative all in all, and so it's really fed into the idea that we will see a rate cut next time around.

01:14Josh, with global markets all over the place, we've been talking a lot about an AI bubble,

01:20but I'm wondering, are we actually in an everything bubble?

01:24I wouldn't say so.

01:26I mean, ultimately, you're looking at the U.S. markets, and they've been almost entirely driven by big tech,

01:31and so I wouldn't necessarily say that we've seen that big boom for the rest of the market.

01:35There is a perception that at some point over the next year,

01:38we're going to see the growth rate of those big tech companies come down meaningfully,

01:42but the rest of the market pick up.

01:44We certainly haven't necessarily seen that too much,

01:46but this earnings season has been pretty good across the board.

01:50So, of course, there's still question marks about whether this bubble is a bubble,

01:53which means it might pop, but we don't know when it's going to pop,

01:56and ultimately, earnings have been very strong.

01:58So, I would hope to think that soon we bottom out and potentially move into a more positive end of year.

02:04It's also been a bit of a roller coaster for Bitcoin, Josh.

02:08Yeah, I mean, it's a really interesting one,

02:10because Bitcoin and crypto as a whole generally take their lead from risk attitudes set within your standard financial markets.

02:17There's a feeling at the moment, because the crypto sphere has sort of permeated throughout the world to such an extent,

02:24that the losses we're seeing at the moment are hindering sentiment within your major markets,

02:29most notably the likes of big tech.

02:32We've seen Bitcoin drop down to 80K.

02:34This is the point in the four-year cycle which typically sees crypto collapse.

02:39That's why we're seeing jitters.

02:41And the big question mark is, is this time different because of the institutional involvement,

02:45or are we set for another one-year decline that resets us for another big bull run for the likes of Bitcoin and the like?

02:53Josh Mahoney, out of Scope Markets.

02:54Always great to chat. Thank you.